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136 Real Estate Terms & Definitions Your Clients Expect You to Know

Kate Evans is a content writer, real estate subject matter expert, and investor based in Charleston, South Carolina. Her career has taken her to Africa, Europe, and around the US, where she’s contributed to numerous print and online business and lifestyle publications. See full bio

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Whether you’re a veteran agent or a rookie hoping to sound authoritative during your first transaction, you need to be able to succinctly explain common real estate terms and definitions to your clients. Even if you know every one of the 136 real estate terms on this list and how to use them, your clients expect you to be their interpreter. This comprehensive list of real estate definitions will help you ensure you’re communicating with clients effectively. After all, great communication leads to closed deals. 

Furthermore, in today’s market, understanding our complex mortgage industry could actually help you close more deals and maybe even save clients money. So we’ve included a handy download with questions your clients should ask their mortgage broker. Download it now and add it to your new homebuyer drip campaign for 2024!

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We present our glossary of 136 real estate terms you need to know—and be able to define for your clients.

A I B I C I D I E I F I G I H I I I J I K I L I M I N I O I P I Q I R I S I T I U I V I W I X I Y I Z

1031 Exchange

This tool, also known as a like-kind exchange, allows investors to defer paying capital gains taxes on a sale. The catch is that they must sell one property and buy a similar one within a set time frame. If you want to work with real estate investor clients, read our own Sean Moudry’s simple, yet thorough rundown: How to Explain 1031 Exchange Rules to Your Clients .

Acceleration clause

Make sure clients who see an acceleration clause in their mortgage contracts understand that this allows their lender to demand repayment of the loan in full if they default on the loan.

Active contingent

To help your clients understand contingencies, use the word “conditional.” If a property is active contingent, a buyer has submitted an offer to purchase a property, but the sale won’t be finalized until certain conditions, or contingencies, are met. A contingency might be the buyer selling their current house, requiring certain repairs to be made, or obtaining a clean termite inspection. 

It might feel stressful, but handling contingencies well is actually a time when you, as the agent, can really shine. Sure, deals can fall apart. There are plenty of things out of your control, like a foundation crumbling, undisclosed liens, or all the seller’s DIY repairs. But if you shepherd your clients through the process with the greatest attention to detail, they won’t forget it.

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Active with contract

Your client might wonder if they can still view a property that’s active with contract (also known as “active under contract”). Let them know that it’s totally fine, assuming the seller agrees, but make sure they understand that the property has an offer with contingencies that have not yet been met. There is always a chance a sale might not go through, especially in today’s wild interest rate market. But if and when the contingencies have been met, the property will be listed as “ pending .”

Clients will come across all sorts of addenda, or supplemental documents that modify a specific part of an existing contract, in the transaction. They must be agreed upon and signed by both parties. One of the most common addenda, and an easy example for clients to understand, is the lead paint disclosure for homes built before 1978, which alerts buyers to potential hazards.

Adjustable-rate mortgage (ARM)

Clients should always consult with their mortgage professional when it comes to specific questions about their mortgage. But it’s helpful to be able to explain the basics.

Clients might be interested in an ARM because it allows borrowers to take advantage of interest rate decreases without having to go through a whole refinance process and pay additional closing costs. Since an ARM’s interest rate fluctuates over time depending on various market factors, some experts believe they save borrowers money in the long run . The disadvantage, of course, is that ARMs make it hard to plan and budget since there is always the possibility (and current reality) of rates increasing.

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Adjustment date

Clients with ARMs need to know their adjustment date, because that’s when they may see a change to the interest rate in an adjustable-rate mortgage. The time between a change in rates is called an adjustment period, and the length of this period depends on the loan. For most ARMs, the adjustment date occurs annually.

Amortization

This is one of those words everyone has heard but few really understand. When it comes to property financing, amortization is the preset schedule of mortgage loan payments, including interest, over time. Generally the payments are scheduled monthly over a period of 15 or 30 years. You know you love a good amortization schedule. How else would you and your clients understand how much is being paid in principal and interest over the years?

Annual percentage rate (APR)

Clients may be confused about the difference between an interest rate on their mortgage loan and an APR. Simply put, the APR includes all of the fees involved, including points. It’s really just the total amount, expressed as a percentage, that it costs to borrow money, including interest and fees.

There are an infinite number of real estate apps out there to boost agent productivity. We have a roundup of our current favorites and bet there is at least one that will solve for one of your pain points.

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The appraisal—an estimate of how much a home is worth— can be a stressful point in the homebuying process for clients. If an appraiser assigns a lower value to the property than what the buyer has offered, the lender might not fund the entire loan amount. The appraiser, after all, is computing the fair market value of a property to ensure that the loan amount is reasonable.  

There are options, though, and y’all are the best at navigating these tricky waters. The most common solution is to negotiate with the seller to bring down the price to the appraised value. You can challenge the appraisal if it’s really off the mark. Or, the buyer can put more money down and reduce the loan amount.

Appreciation

Appreciation of a home’s value can happen over time from a number of factors, like inflation or the neighborhood becoming the it spot. To calculate a property’s projected increase in value over time, divide the change in value by the initial cost of the property and multiply it by 100. Appreciation may not be your clients’ main motivator, but it should always be a consideration. After all, (shout it from the rooftops!) real estate is one of the safest and most profitable investments one can make.

Was that knob-and-tube wiring in the attic? Clients who’ve binge-watched HGTV might be excited about a fixer-upper, but you can help them understand what “as-is” really means. Basically, the property is being sold in its current condition without any improvements, repairs, guarantees, or warranties.

Assessed value

This is the dollar value the local government assigns to a home based on square footage, condition, and relative comps. It helps determine how much owners will pay in property taxes. It’s often presented as a percentage of the fair market value.

This is when the seller signs over all rights and obligations related to a property to the buyer before the actual closing. This is a bit of legalese and probably not a term you’d use in casual conversation with clients.

Assumable mortgage

You don’t hear much about assumable mortgages anymore. If a client asks, it means the buyer will take over the seller’s existing mortgage and existing house-related debt. This might happen if a parent or spouse dies and the heirs take over the mortgage. An assumption clause will be included in the mortgage’s provisions and the lender will typically hold the buyer to the same eligibility requirements as the original borrower. 

While this type of arrangement may be attractive in today’s rising rates environment, you’ll want to explain to your clients that it’s very difficult to take over a mortgage. This is thanks to the Garn-St. Germain Depository Institutions Act of 1982 (“Oh, of course,” they’ll say, and nod their heads knowingly). Basically, the law protects lenders from assumable mortgages with below-market interest rates. Most mortgages now have a “due-on-sale” clause, which requires the borrower to repay the loan in full if they sell the property.

Balloon mortgage

Clients who opt for a balloon mortgage will pay smaller monthly payments at first, followed by one larger-than-typical payment (the balloon) at the end of the loan. They generally come with lower interest rates and the ability to get a higher loan amount. Common in the 2000s, they aren’t as popular now. The final balloon payment can be massive, and one misstep could leave the borrower upside down. 

Biweekly mortgage

Borrowers with a biweekly mortgage will submit their mortgage payments twice a month as opposed to once. This results in 26 payments annually, which means paying one extra month per year. A borrower with a 30-year biweekly mortgage could pay their loan off sooner than those with traditional payment schedules, even by year 25.

Bridge loan

Got clients who found their dream home before selling their current one? A bridge loan can be a real life-saver in this situation. Essentially, it’s a short-term loan that helps a buyer cover costs in the interim between buying a new house and selling one. It could also mean you have the chance to be the client’s buying and listing agent!

Clients may want to know the difference between an agent and a broker. After all, part of the commission they’re paying may go to a broker. You can explain that a broker is equivalent to a manager in the real estate world: an agent with a certain level of experience who has taken the state-mandated education and examinations to meet the requirements to become a licensed real estate broker. (Of course, some states refer to a real estate agent as a “broker.”)

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This is a really helpful concept for today’s market. You’ll want to encourage your clients to consult with their mortgage specialist, but often borrowers can secure a lower interest rate by buying discount points as a one-time fee paid at closing. A buydown can also exist when a seller makes initial payments toward the mortgage to reduce the interest rate, usually in exchange for a higher purchase price. Both routes represent great options to consider if interest rates are, ahem , rapidly rising.

Call option

This gives a buyer an exclusive right, or option, to purchase a certain property at a set time for a specified price.

Cash-out refinance

A homeowner can refinance their property for more than its value and take the added amount as cash. It generally results in a higher interest rate or additional points, but it’s a way for homeowners to leverage their equity in a property. 

Certificate of eligibility

When working with veterans, you’ll want to prepare them for a fair amount of paperwork. The certificate of eligibility is but one example of this. It’s an official form certifying that a veteran has met the terms that qualify someone for a VA loan . VA loans might have a lot of red tape, but they can be excellent, affordable options for service members and their spouses.

Certificate of reasonable value

This is a form from the Department of Veterans Affairs outlining the maximum amount that can be issued to a borrower of a VA loan. Like we said, lots of paperwork.

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Chain of title

As clients get ready for closing, they’ll hear a lot about the title . Chain of title is an historical record of previous owners of a property that’s essential in establishing the legal ownership of the property. An established chain of title helps protect the buyer from future challenges to ownership. A title search helps create that chain and is usually conducted by a lawyer or title company prior to closing.

Clear title

Clients may want to know why you’re doing a happy dance when you hear the property has a clear title. A clear title, you explain, indicates that there are no liens or encumbrances on the property. It’s also known as a “just title” or “free-and-clear title.” A title with liens or encumbrances has a “cloudy title.” Properties can have their titles cleared, but it can take a long time and may even require legal action.

Pay day! Another happy dance. Also known as the agreed-upon date when a property changes ownership from the seller to the buyer.

Closing costs

You can explain early in the process that closing costs are all of the additional fees related to the purchasing or selling of a property. They are generally between 3% and 5% of the purchase price and account for appraisals, taxes, attorney fees, and title insurance. 

It’s really important that your clients are keyed into this crucial part of the process. Clients will need an exact accounting of the total amount owed in closing costs. They’ll also need to ensure that those funds are properly wired or deposited on the closing date.  

Remember that time when a wire transfer didn’t go through from a third party who was hiking on top of a mountain and couldn’t be reached? Prepare your clients to double, triple, quadruple check everything related to these costs and their transfer.

Co-borrower

Don’t you love it when the co-borrower is the client’s dad who comes along on the inspection and is suddenly an expert on chimney engineering? If your clients are concerned about getting approved for a loan, you can remind them that a co-borrower agrees to back the borrower in a mortgage loan. They sign all of the loan documents, have interest in the property being purchased, and are required to pay the monthly payments if the primary borrower is unable to.

My guess is that, while you know exactly what a commission is and how it works, your clients might have some questions. 

You can explain to them that a commission is the amount charged by the real estate agents who lead the transaction. It is almost always paid by the seller. Generally 6% of the purchase price of the property, commissions are usually split between the buyer and seller agents and then between the agents and their brokers.

Community property

In a community property state—namely Arizona, California, Delaware, Idaho, Louisiana, Maryland, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, South Carolina, Tennessee, Texas, Washington, and Wisconsin—any real estate purchased during a marriage belongs equally to each spouse, 50-50.

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Comparable sales

Of course, the ultimate pricing decision lies with the seller, but we hope they listen to you because you’ll come up with a price based on the science and art of the comparative market analysis (CMA). To create a CMA (see below), you’ll collect similar properties that have closed recently, also known as comps.

Comparative market analysis (CMA)

When you sit down for your listing appointment, one of the most important things you’ll have with you is your comparative market analysis. This is an estimate of a property’s worth, determined by local comparable sales, market data, sale history, and location. 

CMAs are a place where an agent can really show off their knowledge and professional value. In this article, our own Chris Linsell explains how to create an unbeatable CMA .

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Compound interest

The concept of compound interest can perhaps best be described by Benjamin Franklin, who allegedly said, “money makes money. And the money that money makes, makes money.” Albert Einstein supposedly called compound interest mankind’s greatest invention. 

It’s essentially the idea that if you invest your returns into more investment, that money multiplies. This works in your client’s favor if they are collecting on investments, but against them when applied to debt.

Construction loan

A construction loan is a short-term loan that covers the cost to build a property until the owner can secure long-term financing.

Contingency

Clients often have trouble understanding the difference between contingent and pending . A property is considered contingent when the buyer has made an offer to purchase it, as long as certain conditions are met. This could mean repairs need to be made or the buyer’s home needs to sell. Whatever these contingencies are, they have to be resolved before the property can close.

Conventional mortgage

Conventional mortgages are the ones that aren’t part of a specific government program, such as Fannie Mae, Freddie Mac, USDA, or the VA. Generally, borrowers who go the conventional route are lower risk, offer a larger down payment, and don’t require mortgage insurance.

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Convertible adjustable-rate mortgage 

It’s kind of like a fixed-rate mortgage and an adjustable-rate mortgage had a baby. A convertible ARM is a mortgage with a much lower interest rate at the start of the loan, where the interest rate fluctuates during the life of the loan, usually every six months. But, unlike a traditional ARM, a borrower has the option to switch to a fixed-rate mortgage. These mortgages were developed in the 1980s in an era of double-digit interest rates when borrowers were hopeful that the rates wouldn’t rise much more.

Cost of funds index (COFI)

Used to calculate variable interest in adjustable-rate mortgages, COFI is a benchmark determined by average regional interest rates incurred by financial institutions.

Customer relationship manager (CRM)

A CRM helps agents track leads in their sales funnel. Robust CRMs have email and text drip campaigns and many even let you call prospects and track responses directly through the system. The best CRM is one you’ll use, so make sure it’s user-friendly, has all the bells and whistles you need, and helps you reach out to prospects and leads quickly and consistently.

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Days on market (DOM)

As a seller’s agent, you’re counting the days a listing is on the market. Chances are your client is too. Which is why she’s calling you before breakfast.  

Simply put, this measures the number of days a property is for sale, from the day it is listed on the multiple listing service (MLS) to the day a buyer and seller are under contract.

The deed is a legal document recording the transaction of title (or official ownership transfer) from the seller to the buyer. It is recorded at the local county clerk’s office. Really just a combo of legalese and paperwork, but everyone feels better having a tangible representation of ownership.

Deed in lieu of foreclosure

This is when a homeowner turns a deed over to the mortgaging bank to avoid going into foreclosure. This allows the borrower to avoid personal liability for the remaining unpaid debt. In some cases, they may be able to continue living in the property.

To default on a mortgage loan means the borrower has stopped submitting monthly payments.

Delinquency

Borrowers can go into delinquency if they have stopped paying their monthly mortgage loan payments for a certain time period. At this point, the lender has the option to start foreclosure proceedings.

Debt-to-income ratio (DTI)

This is an important calculation for lenders when considering mortgage applications and whether borrowers can afford to make payments. You can help your clients calculate their DTI by adding together all of their monthly payments and dividing the total by their gross monthly income.

Discount points

Borrowers may pay these fees at closing to secure a lower interest rate.

Down payment

Crucial question for your clients: How much can you put down? After a good look at their finances, a nice long chat with their financial advisers, and an extensive application with a mortgage lender, they might finally have an answer. 

A down payment is the amount of money that a buyer uses to secure a mortgage on a property. Conventional loans often require 20% of the purchase price, while government-backed mortgages could require much less (sometimes nothing!). Loans with less than 20% down often require buyers to pay private mortgage insurance until they reach a certain equity ratio.

Due diligence period

What if your clients are asking about their due diligence period? Easy, you explain: It’s a specified amount of time after an offer is made during which the buyer can inspect the property and review relevant documents. It’s a chance for the buyer to be sure in their decision to move forward with the purchase. It’s also a period when seller’s agents tend to bite their nails, breath rapidly into paper bags, and yes, they will have that third margarita, thank you.

Due-on-sale clause

Also called an acceleration clause, this requires the borrower to repay the loan in full when a property (or collateral) is sold. It all goes back to that riveting Garn-St. Germain Depository Institutions Act, which was put into place to protect lenders from assumable mortgages .

Earnest money deposit

First-time buyers may be new to this concept, so it is worth bringing it up in the beginning of the home-search process. Also known as a “good faith deposit,” it’s the amount of money a buyer puts in escrow to show their commitment to purchase a property. Usually a small percentage (1% to 3%) of the purchase price, it goes toward the purchase at closing. If the sale falls through, the seller could keep some or all of the earnest money, depending on the situation.

When examining a property—to buy or sell—it’s crucial to first understand if there are any easements on the property. An easement is the legal right for a non-owner to use or cross a property for a specific purpose while the title remains with the owner. 

One example is someone using a private road to access their own land. Another one that is popular down here in Charleston is a conservation easement. This means that the owner has donated a portion of the property to be protected because it has historic, cultural, or environmental significance. The owner can receive tax credits in exchange.

Eminent domain

This is the government’s right to use private land for a specific, public purpose after compensating the owner.

Encroachment

An encroachment is a violation of an owner’s property rights by building or extending onto their land without permission. For example, if you build a fence and part of it is on your neighbor’s yard, that’s encroachment.

Encumbrance

You just never want to hear that a property has an encumbrance. Never. Want to. Hear it. And if you do hear it, you need to explain it to your client. An encumbrance is a claim against a property such as a mortgage, lien, or easement. These can affect the transferability of ownership.

Equal Credit Opportunity Act

This was groundbreaking legislation when it passed in 1974. Today it offers agents the opportunity to further the cause of equality and justice in our professional transactions. The act protects potential borrowers against creditors who would discriminate against their mortgage application based on race, color, religion, national origin, sex, marital status, age, or acceptance of public assistance.

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This is the amount of a property that a person (not the bank) actually owns. For example, if you put a down payment of 20% on a $200,000 home and got a loan for the rest, your home equity is $40,000. Your equity will increase as you pay down the loan and as your property value increases. But it could decrease if you take out more loans against the property or if the home rapidly declines in value.

A third party holds funds in escrow during the real estate transaction, releasing them at closing. Generally, this refers to earnest money funds. Some states have laws on the books requiring escrow account holders to pay interest on these funds, though banks are often exempt.

Examination of title

Before closing, everyone will want to make sure that the title is clear. Title companies research a property’s transfer of ownership through public records to trace its history and ensure there are no encumbrances that could affect the purchase.

Exclusive listing

When walking through a new listing agreement, it’s important to explain all of the different representation options. An exclusive listing gives one real estate agent a property listing and a certain amount of time to get the property sold. That agent is expected to find buyers and oversee the transaction during this period. This is a good topic to cover when you’re explaining commissions, percentages, and how they are split.

Fair Credit Reporting Act

This one doesn’t get as much attention as the Fair Housing Act , but it was a game changer for the industry. Before the Fair Credit Reporting Act, consumers were not nearly as protected and abuse of personal data ran rampant.

Enacted in 1970, the Fair Credit Reporting Act ensures that files containing personal information gathered and held by consumer credit reporting agencies are handled fairly, accurately, and privately. It also gives consumers access to their own information.

Fair market value

The fair market value is essentially the price that the market is able to bear, borne out by the fact that both the buyer and seller agree upon it. Make sure your clients don’t confuse it with the appraised or assessed value.  

It’s actually a legal term. Courts define it as “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.”

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The colloquial name for the Federal National Mortgage Association, Fannie Mae is one of the most active sources of mortgage financing in the country. Fannie Mae is a government-sponsored enterprise that allows medium- to low-income families and individuals to obtain affordable mortgages.

This is a type of common property ownership in which there are no conditions or restrictions, and the property is owned absolutely.

FHA mortgage

FHA mortgages are government-backed property loans insured by the Federal Housing Administration. They differ from conventional loans in that the down payment and credit score requirements are lower. That’s why they’re especially popular with first-time homebuyers.

Fixed-rate mortgage

With a fixed-rate mortgage, the interest rate is set and does not fluctuate during the life of the loan. This gives the borrower the stability of knowing the monthly payments will stay the same over the course of the 15 or 30 years of the loan. If interest rates dip significantly, borrowers can refinance their loan but will have to pay closing costs.

For sale by owner (FSBO)

This is when the owner of a property publicly lists it for sale without the assistance of a licensed real estate agent. Agent slowly raises palm to forehead . Many FSBOs are hoping to save money by not paying a seller agent’s commission fee. But given the cost savings that agents typically bring to a transaction thanks to their marketing and pricing expertise, they probably won’t. Learn more about FSBOs and who pays the buyer’s commission with a FSBO in this HomeLight article .

Foreclosure

If a property owner stops paying their mortgage payments, usually for at least 90 days, the lender can start foreclosure proceedings. This can lead to a short sale, foreclosure auction, and/or the lender taking possession of the property.

Freddie Mac

Freddie Mac is the common name for the Federal Home Loan Mortgage Corporation, or FHLMC. It’s a privately traded, government-backed company that offers greater accessibility to mortgage loans and provides stability in the market.

Home equity conversion mortgage

A home equity conversion mortgage is a type of reverse mortgage offered by the FHA that allows the borrower to withdraw a portion of their equity in a property.

Home equity line of credit (HELOC)

This is a line of credit based on the equity one has in their property.

Home inspection

Whether it’s bats, creaky foundations, creative duct-taping, or prominently displayed naked photos of the homeowners, most agents have encountered something unexpected in this phase. If you need a few more examples, check out realtor.com’s Strange but True Tales From the Trenches .

Generally, a buyer will enlist the services of a licensed home inspector after the initial offer phase. The inspector will look for major (and sometimes minor) defects in a home that could impact the value. Inspectors usually look at the foundation, roof, plumbing, electrical systems, and HVAC.

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Homeowner’s association (HOA)

Buyers looking at a home in a planned community need to know what an HOA is and why it’s important. An HOA is an entity that oversees the rules and regulations related to a planned neighborhood or multifamily building. They can also offer services to homeowners, manage shared property and common areas, ensure appearances are kept up, plan activities, and protect property values. Homeowners generally pay HOA fees each month. If they neglect to do so, the HOA can put a lien on the property. 

HOAs have quite the reputation, but they’re not all bad. Or maybe they are. We appreciate Atlanta-based CPA Neal Bach’s list of his top 10 most amusing HOA stories . Our favorite is the HOA that mandated residents wear polo shirts and khaki pants when holding a garage sale. And yes, there absolutely was a fee for noncompliance!

Homeowners insurance

Clients will need to arrange property insurance before closing. That’s why it’s smart to start shopping around as soon as they are under contract. Homeowners are required by their lenders to obtain homeowners insurance, which protects both the owner and mortgage provider against calamities, natural disasters, and accidents occurring on the property. Insurance is generally folded into monthly mortgage payments. Be aware that certain areas may have special requirements, like properties in flood zones needing flood insurance.

IDX website

A real estate agent’s website is one of the most important marketing and lead generation tools in their arsenal, especially when they have IDX functionality. IDX, or internet data exchange, allows your website to “talk” to the MLS and keep up-to-date real estate listings right on your site. We have done extensive research and selected our top real estate website builders that include IDX to help agents select the best provider. Check out our roundup below:

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Judicial foreclosure

In many states, lenders must obtain a foreclosure ruling through the courts before commencing foreclosure proceedings.

A jumbo loan is one that goes over the “conforming loan limit.” That makes it ineligible to be backed by government-sponsored programs administered by Fannie Mae , the FHA , and Freddie Mac . The limit is based on local median home values. Jumbo loans generally require stricter qualifications, higher credit scores, and higher income or cash reserves.

Lead generation

Agents generate leads to keep their sales funnels full and ensure a steady pipeline of prospects and leads. Lead generation activities can range from cold calling to buying leads and everything in between.

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Lease option

As the market cools and rates rise, this could be an attractive option for buyers who have found their dream home but are hoping rates will come down in the near future. A lease option is also known as a rent-to-buy. A property is leased for a determined monthly amount and can be purchased at any time during the lease for a specified amount of money.

In real estate, a lender is any individual or institution that provides financing to purchase a property, with the expectation that the amount will be repaid with interest.

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We bet you have a lot of clients who think they understand this concept but could maybe use a refresher. A lien against a property means there is some unpaid debt where the property was used as collateral. This could tangle up the closing process if not properly handled. Liens can come from unpaid mortgages, construction bills, even HOA fees. A mortgage is also considered a lien.

On an adjustable-rate mortgage, this is the maximum rate of interest that can be charged above or below the initial interest rate. Generally, the life cap of an adjustable-rate mortgage is 5% or 6%, although it could be higher. This means that even if interest rates rise more than that life cap, the borrower will not have to pay those rates.

Loan officer

A loan officer is a licensed official with a financial institution who is responsible for helping borrowers understand the mortgage process, choose a loan, apply for and receive it, and communicate with other transaction stakeholders. These are the people who should be answering all of your client’s mortgage-related questions.

Loan origination

This is the time period during which a financial institution reviews a borrower’s loan application. There is sometimes a loan origination fee, as the institution gathers information and data to assess the borrower’s risk.

Loan servicing

Servicing is everything involved in the administration and maintenance of a loan. It includes sending out statements; collecting, recording and tracking payments; managing escrow funds; and following up on unpaid debts. This is important for clients to understand because the company that they ultimately pay might be different from the institution from which they originally took out the loan (the originator).

Loan-to-value (LTV)

This is the ratio between the loan amount and the property value. To find the LTV, divide the loan amount by the value. A higher LTV denotes greater risk to the lender.

Lock-in period

A borrower must wait a certain amount of time before being able to pay off a loan in full. If a borrower does pay off a loan during the lock-in period, fees are usually involved. Make sure your clients don’t confuse this with a rate lock .

A buyer who can’t pay cash for a home will take out a loan, or mortgage, from a financial institution, using the property itself as collateral. In exchange, the borrower will pay back the loan regularly over a scheduled period of time and with interest. Remember, the mortgage guys are the professionals. When it comes to specific mortgage questions, be sure you’re referring your clients to qualified people.

Mortgage banker

A mortgage banker represents the financial institution issuing the loan and oversees each step of the process. Make sure your clients understand the difference between a mortgage banker and mortgage broker.

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Mortgage broker

A mortgage broker has access to multiple financial institutions. This way, they can shop around to find a mortgage with the best interest rates or deal for the borrower. 

Mortgage insurance, aka private mortgage insurance (PMI)

Mortgage insurance protects banks against payment default. It’s often required by lenders if the borrower is putting down less than 20%.

Multiple listing service (MLS)

Like Zillow, but for real estate professionals, the MLS is a network of local lists that create a database of properties for sale. 

Negative amortization

Negative amortization can happen when a borrower doesn’t put enough in their monthly repayments to cover the interest. In this situation, the total amount owed on the loan continues to increase.

No cash-out refinance

A borrower might use a no cash-out refinance to take advantage of a lower interest rate or to shorten the term of their mortgage. The borrower isn’t taking money out based on the equity of the property as they would in a cash-out refinance. 

No-cost mortgage

In a no-cost mortgage, the lending institution pays all of the closing costs in exchange for the borrower paying a higher interest rate. This benefits the lender in that they can then sell the mortgage on a secondary market for more because of the higher rate. It benefits a borrower who plans on staying in a property for less than five years. They save the closing costs and aren’t saddled with a higher interest rate for 15 or 30 years.

Also called nominal rate, this is the amount of interest set for a loan used to calculate the monthly payment on a mortgage. Clients often confuse the note rate with the annual percentage rate. But the APR is actually used to compare what it would cost for a specific loan with a certain lender, adding all their particular fees in. 

What Should You Not Say When Selling a House: An Agent’s Guide

Open listing

A seller who uses an open listing doesn’t have an exclusive agreement with an agent. This means that any agent can compete to find a buyer and receive the commission. Similar to a FSBO, an open listing might save the seller some money, but we all know it comes with a lot of headaches. 

Without a real estate professional, the seller doesn’t have someone who can provide advice and help move the transaction along. Agents might also be less motivated to market the property since they are not guaranteed a commission.

The 10 Best FSBO Scripts (+ Why They Work)

Original principal balance

The original principal balance is the total amount owed on a loan before any repayment begins. This is the number clients will see before they pay their first monthly payment, though it generally does not have the escrow balance applied to it. 

Origination fee

A borrower will pay an origination fee to the lending institution to cover the cost of processing a mortgage loan. Clients might be surprised to learn that an origination fee is typically between 0.5% and 1.5% of the total loan amount. This means an origination fee on a $250,000 loan could be as high as $3,750.

Owner financing

If a buyer secures a mortgage directly from the seller, it’s considered owner (or seller) financing. The borrower generally avoids the fees, requirements, and rates associated with conventional loans and works out a legal and binding contract with the seller. There are also several advantages to the seller. They can typically set their own loan terms and sell the property as-is. Also, it all usually happens much more quickly than waiting on slow-moving financial institutions. 

Of course, there is risk involved, but sellers can often retain the deed until the debt is paid off. For buyers who struggle with good credit or putting together a 20% down payment, seller financing can open a lot of doors.

Pay-at-closing leads

Maybe you want leads, but you don’t have the budget to splash out on buying them right now. With a pay-at-closing lead gen model, you can obtain and work leads and then only pay when they close on a property. Just note that the cost is usually pretty substantial, even as much as 35% of the commission.

Top 8 Sources for Pay at Closing Real Estate Leads

This definitely gets confusing for clients poking around on Zillow, Redfin, and even the MLS. What’s the difference between active, active-contingent, pending, and all of the other terminology? If a sale is labeled “pending,” all of the contingencies on the sale have been met and it is moving toward closing. Chances are very good that this sale will close. If not, the buyer may be at risk of losing their earnest money. 

Per diem fees

Per diem fees are paid by the borrower for every day a loan is scheduled to close but does not. To calculate the per diem, multiply the loan amount by the interest rate (as a decimal) and divide that total by 365. The fees are generally paid to the lender at closing. 

A seller could also add a per diem clause in the contract. For example, if a buyer doesn’t close on a specified date, they might be required to pay a certain amount per day to cover utilities, insurance, HOA fees, or taxes.

Principal, interest, taxes & insurance ( PITI )

This figure calculates monthly housing costs by adding up principal, interest, taxes, and insurance. PITI represents the total amount owed by a borrower every month. Many recommend borrowers keep PITI to less than (or equal to) 28% of their total monthly income. This is helpful for clients to know when they are considering how much house they can afford. 

Planned unit development (PUD)

A PUD is a grouping of residential buildings. It could be made up of townhouses, condos, or single-family homes, and generally includes common areas such as pools, tennis courts, playgrounds, and parking. PUDs almost always have HOAs and associated fees. 

It’s crucial that clients looking at PUDs understand the covenants, rules, regulations, and costs involved. For example, a client looking for a home where they could also host exercise classes for paying customers might run into trouble with a PUD’s HOA rules about running a business out of a home. And make sure they’re aware of any required dress code when holding a garage sale.

Pocket listing

A pocket listing is a property that’s being marketed quietly, in back channels. It can benefit sellers who value privacy or want to test the waters before listing publicly. 

What should you do when a client asks for a pocket listing? Pocket listings are risky in that there is a lack of transparency that could end up limiting the number of potential buyers. This also makes pocket listings controversial, to the point where the National Association of Realtors (NAR) enacted the MLS Clear Cooperation Policy . This states that agents must put a pocket listing on the MLS within one day of any kind of marketing.

Pre-approval

Again, this is all really in the purview of the mortgage experts. However, your clients need to know the difference between pre-approval and prequalification (see below). After all, having a pre-approval letter from a lender can go a long way in giving a seller confidence when looking over an offer. 

After a borrower applies for a loan, a lender will grant them pre-approval for a certain amount based on verifying all of the information gathered. It’s important for your clients to understand that pre-approval does not guarantee a mortgage loan.

Predictive analytics

A predictive analytics company pulls together millions (if not billions) of data points from multiple sources in order to forecast the future. In real estate, common data sources include demographics, property, event data, and behavioral trends. This forecasting can influence, and even direct, strategic decisions, but it can also help agents hyper-target their marketing and lead generation activities on the prospects most likely to buy or sell in the next year.

Predictive Analytics in Real Estate: Best Practices & Software for Agents

Prequalification

Prequalification is the very first step in the mortgage loan process. A financial institution will prequalify a borrower for an estimated amount. It’s not as thorough a process as pre-approval, so it’s important to remember that this is even less of a guarantee of a loan.

Prime interest rate

With everyone’s eyes focused firmly on interest rates, it’s important to know what it all means. A prime interest rate is what financial institutions use as a basis to determine rates for mortgages, credit lines, and even credit cards. 

Each bank has its own prime interest rate, based on the Federal Reserve’s federal funds rate. While the prime interest rate is not the best or most competitive rate, it’s the one published publicly that can be adjusted based on individual loans. This is where clients with good credit, high down payments, and low debt-to-income ratios can negotiate for better rates.

Principal is one of those words that can mean different things to different people, probably because it all depends on the context. 

In lending, principal is the total amount of money borrowed that must be paid back with interest. 

In real estate, the principal could also refer to a party (the buyer or seller) who has authorized an agent to act on his or her behalf. 

It could also refer to the managing broker in a brokerage, or the individual who’s ultimately legally responsible for overseeing transactions.

This is the process of reviewing a deceased person’s estate and will and administering the transfer of property. Probate can take place whether or not the deceased had a will in place.

Proof of funds

Clients should be aware that proof of funds is different from pre-approval from a lending institution. Buyers with all-cash offers still need a proof of funds letter, but for the entire amount.

A proof of funds letter lays out the financial situation of the buyer, demonstrating their capacity to buy a property. It should show that the buyer has enough cash on hand to cover the down payment and closing costs. These funds must be liquid, not stocks or bonds. 

A proof of funds form can be furnished by a bank, or you can use this simple proof of funds template from realtor.com.

Purchase agreement

Once an offer is accepted and all of the parties have signed, it becomes a contract, or a purchase agreement. It’s important for buyer clients to understand that if they submit an offer, it becomes a binding contract once the seller agrees and signs. 

A purchase agreement outlines the terms and conditions of a sales contract. It affirms the buyer’s intent to purchase the property and the seller’s intent to convey it to the buyer. It also outlines the general agreed-upon terms, such as the purchase price, contingencies , closing date , and earnest money details.

Imagine a client submits an offer, and then rates increase exponentially in the period between the contract being signed and the closing date. It could throw off the entire deal.

Luckily, borrowers can lock in an interest rate for a certain amount of time. This protects that rate against fluctuations in the market in the time between making an offer and the closing date. Clients should check with their mortgage specialist to see what time frames are available and the fees associated with them.

This Free Download Helps Your Clients Understand Rate Lock

Real estate agent

You know who you are! Clients might be interested to know that you have specific education requirements, are licensed by the state, and must follow certain laws. And if you’re a member of NAR , you’re bound by a very stringent code of ethics.

How to Get a Real Estate License in 5 Simple Steps

Real-estate owned (REO)

Properties that have been possessed by a lender after the borrower has defaulted on a loan and a short sale or auction was unsuccessful are called real estate (or bank) owned.

Real Estate Settlement Procedures Act (RESPA)

The Real Estate Settlement Procedures Act of 1974, or RESPA, is a piece of legislation that protects consumers. It requires lenders to be transparent by providing timely disclosures of the scheduling and costs of a real estate transaction. It also prohibits kickbacks and inflated fees and places some limitations on the uses of funds in escrow. 

Before RESPA, mortgage lending felt like the Wild West. Consumers could easily find themselves at the mercy of bad actors who charged exorbitant fees, required referrals, and promised one thing but delivered something very different. 

If your clients are concerned about the relationship between real estate professionals and bankers, you can assure them that agents and mortgage lenders are governed by RESPA regulations.

Many think this term is synonymous with agent, but it’s not. A Realtor is a real estate agent who is a dues-paying member of the National Association of Realtors. NAR members are held to a high standard of professionalism and adhere to a strict code of ethics .

If a borrower takes out a new loan on the same property, it’s called a refinance. The debt owed remains the same, but generally under better terms, such as a lower interest rate, smaller payments, or a shorter loan term. 

Right of first refusal (ROFR)

Giving someone the right of first refusal means that they have the opportunity to submit an offer on a property before anyone else. The seller can charge whatever price they want and the potential buyer can offer whatever they think is fair. It doesn’t mean the offer will be accepted, but it does give the potential buyer an advantage. 

Right of ingress or egress

The right of ingress is one’s right to enter their property, and egress is to exit their property. You’re likely to hear these terms mentioned when there is an easement on a property. 

Sale-leaseback

This occurs when a seller and a buyer close on a property, but the seller needs more time to vacate the property. The seller can then lease back their former home from the buyer and pay rent for a specified period. This can be a great negotiation point between buyers and sellers if time is an issue.

Second mortgage

Borrowers can take out a second mortgage on a property using the property as collateral. The first mortgage remains in effect, and would be the first loan to be paid off if there is any default. Generally, second mortgages have high interest rates and are for less money than the first mortgage.

Secured loan

A mortgage is a type of secured loan, where one uses collateral—in this case a property—to secure funds. Loans can also be secured by cars and other high-value items. 

If a borrower is behind on payments and in a dire financial situation, a lender might allow a short sale of the property. In such a case, they generally accept less than is actually owed on the mortgage. 

Buyers are often interested in short sales because they can mean a good deal on a property. But short sales are incredibly complicated. And the process is anything but short.

How Smart Investors Decipher & Respond to Real Estate Market Cycles

Staging 

Seasoned agents know that staging can really help a home shine, especially if the property is vacant. Applying a neutral, trendy look can help prospective buyers visualize themselves living in the house and can even increase the sales price. 

Bringing in new design elements and storing owners’ current furniture can be pricey. But many staging companies assure sellers that they will recoup those costs in the sale of the home. 

If staging is not an option, consider tactful ways of suggesting that the owners declutter. Or just follow this list of clever staging tips !

Termite report/inspection/letter/bond

Imagine your clients purchase a home and, as they walk through the kitchen, their feet go through the floorboards because termites have been snacking on the wood. Termites can cause catastrophic damage. That’s why many lenders require proof that a property has been inspected for termites and termite damage. 

Banks may also require that the home be under a continuous termite bond. This shows that the home is regularly inspected and treated for termites by a professional pest control company. If termites are found, there are options of remediation. But the process is often pretty dramatic, like tenting the entire house and pumping in toxic gas.

A title is one’s legal right to a property, to use it however one wants, and to transfer it how and when and to whomever one wants. It is different from a deed, which legally shows who is the property owner.

Title insurance

Let’s say you’re a buyer who purchases a property after conducting a title search, believing the title to be clean. Two weeks later, a fourth cousin, twice removed, of a little old lady who owned the house 74 years ago shows up on the porch saying you’re living in his inheritance. Title insurance has got you covered—it protects a property owner and a lender against claims on a property title.

Title search

When purchasing a property, most buyers will hire a lawyer or title company to comb through public records to follow the transfer of the title across the decades. This ensures that the title is clean and free of any liens or encumbrances. Individuals can conduct their own searches, but that’s not usually recommended. Generally, title insurance companies accept 30 years of record, which is good news for owners of historic homes. 

Transfer of ownership

This is a fancy way of explaining the conveyance of the deed and title from the seller to the buyer at closing.

Transfer tax

A transfer tax is essentially a fee charged by the state, county, or municipality to handle transferring the title. Clients will expect you to know the rates and if there are any applicable exceptions, as will the writers of your state’s real estate licensing exam. 

Almost everywhere, the seller pays the transfer tax. The fee is based on the value of the home and can be calculated in increments or as a percentage. For example, in South Carolina, the combined state and local fee is $1.85 per every $500 increment of the total sale price.

Under contract

If a buyer and seller have agreed on a price and terms and signed a contract, then the property is under contract. However, all contingencies have not yet been met, and the closing has not taken place. Once the contingencies are met, the property is considered pending and the sale will most likely go through.

Again, this is a time of great uncertainty, and while an agent can control a lot, you can’t control everything. Stay diligent, stay vigilant, stay calm. And make sure you take your phone off silent.

14 Real Estate Testimonial Examples to Inspire Your Referral Marketing

USDA loans are backed by the Department of Agriculture and tend to have lower mortgage insurance requirements than other government-backed loans. They also don’t require a down payment. The catch is that the property must be in suburban or rural areas to qualify.

Free Download: Loan Questions That Could Save Your Clients Money

VA mortgage

A VA mortgage is managed by the Veteran Benefits Administration and offers a guarantee for some or all of a mortgage issued by a private financial lender. This guarantee allows servicemen and women, veterans, and surviving spouses access to better loan terms. Those who qualify can learn more and apply for a VA mortgage loan here .

Bringing It All Together

You made it through all 136 real estate terms! Ensuring that you know and can explain these definitions will go a long way in helping your clients. No matter where you are in your real estate career, we hope this list of crucial real estate terms and definitions was helpful, a good refresher, and maybe even enlightening. How about that Garn-St. Germain Depository Institutions Act? Great anecdote for cocktail parties!

Did we miss any of your favorite terms? Have any definitions to add? Be sure to leave a comment below!

Kate Evans is a content writer, real estate subject matter expert, and investor based in Charleston, South Carolina. Her career has taken her to Africa, Europe, and around the US, where she’s contributed to numerous print and online business and lifestyle publications.

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Assignment Definition

Investing Strategy , Jargon, Legal, Terminology, Title

Table of Contents

• What Is an Assignment?
• What is an Assignment in Real Estate?
• What Does it Mean to Assign a Contract in Real Estate?
• How Does a Contract Assignment Work?
• Pros and Cons of Assigning Contracts

REtipster does not provide legal advice. The information in this article can be impacted by many unique variables. Always consult with a qualified legal professional before taking action.

An assignment or assignment of contract is a way to profit from a real estate transaction without becoming the owner of the property.

The assignment method is a standard tool in a real estate wholesaler’s kit and lowers the barrier to entry for a real estate investor because it does not require the wholesaler to use much (or any) of their own money to profit from a deal.

Contract assignment is a common wholesaling strategy where the seller and the wholesaler (acting as a middleman in this case) sign an agreement giving the wholesaler the sole right to buy a property at a specified price, within a certain period of time.

The wholesaler then finds another buyer and assigns the contract to him or her. The wholesaler isn’t selling the property to the end buyer because the wholesaler never takes title to the property during the process. The wholesaler is simply selling the contract, which gives the end buyer the right to buy the property in accordance with the original purchase agreement.

In doing this, the wholesaler can earn an assignment fee for putting the deal together.

Some states require a real estate wholesaler to be a licensed real estate agent, and the assignment strategy can’t be used for HUD homes and REOs.

The process for assigning a contract follows some common steps. In summary, it looks like this:

• Find the right property.
• Get a purchase agreement signed.
• Find an end buyer.
• Assign the contract.
• Close the transaction and collect your assignment fee.

We describe each step in the process below.

1. Find the Right Property

This is where the heavy lifting happens—investors use many different marketing tactics to find leads and identify properties that work with their investing strategy. Typically, for wholesaling to work, a wholesaler needs a motivated seller who wants to unload the property as soon as possible. That sense of urgency works to the wholesaler’s advantage in negotiating a price that will attract buyers and cover their assignment fee.

RELATED: What is “Driving for Dollars” and How Does It Work?

2. Get a Purchase Agreement Signed

Once a motivated seller has agreed to sell their property at a discounted price, they will sign a purchase agreement with the wholesaler. The purchase agreement needs to contain specific, clear language that allows the wholesaler (for example, you) to assign their rights in the agreement to a third party.

Note that most standard purchase agreements do not include this language by default. If you plan to assign this contract, make sure this language is included. You can consult an attorney to cover the correct verbiage in a way that the seller understands it.

RELATED: Wholesaling Made Simple! A Comprehensive Guide to Assigning Contracts

This can’t be stressed enough: It’s extremely important for a wholesaler to communicate with their seller about their intent to assign the contract. Many sellers are not familiar with the assignment process, so if the role of the buyer is going to change along the way, the seller needs to be aware of this on or before they sign the original purchase agreement.

3. Find an End Buyer

This is the other half of a wholesaler’s job—marketing to find buyers. Once they find an end buyer, the wholesaler can assign the contract to the new party and work with the original seller and the end buyer to schedule a closing date.

4. Assign the Contract

Assigning the contract works through a simple assignment agreement. This agreement allows the end buyer to step into the wholesaler’s shoes as the buyer in the original contract.

In other words, this document “replaces” the wholesaler with the new end buyer.

Most assignment contracts include language for a nonrefundable deposit from the end buyer, which protects the wholesaler if the buyer backs out. While you can download assignment contract templates online, most experts recommend having an attorney review your contracts. The assignment wording has to be precise and comply with applicable local laws to protect you from issues down the road.

5. Close the Transaction and Collect the Assignment Fee

Finally, you will receive your assignment fee (or wholesale fee) when the end buyer closes the deal.

The assignment fee is often the difference between the original purchase price (the price that the seller agreed with the wholesaler) and the end buyer’s purchase price (the price the wholesaler agreed with the end buyer), but it can also be a percentage of it or even a flat amount.

According to UpCounsel, most contract assignments are done for about $5,000, although depending on the property and the market, it could be higher or lower.

IMPORTANT: the end buyer will see precisely how much the assignment fee is. This is because they must sign two documents that show the original price and the assignment fee: the closing statement and the assignment agreement, respectively, to close the transaction.

In many cases, if the assignment fee is a reasonable amount relative to the purchase price, most buyers won’t take any issue with the wholesaler taking their fee—after all, the wholesaler made the deal happen, and it’s compensation for their efforts. However, if the assignment fee is too big (such as the wholesaler taking $20,000 from an original purchase price of $10,000, while the end buyer buys it for $50,000), it may ruffle some feathers and lead to uncomfortable questions.

In these instances where the wholesaler has a substantially higher profit margin, a wholesaler can instead do a double closing . In a double closing, the wholesaler closes two separate deals (one with the seller and another with the buyer) on the same day, but the seller and buyer cannot see the numbers and overall profit margin the wholesaler makes between the two transactions. This makes a double closing a much safer way to conclude a transaction.

Assigning contracts is a way to lower the barrier to entry for many new real estate investors; because they don’t need to put up their own money to buy a property or assume any risk in financing a deal.

The wholesaler isn’t part of the title chain, which streamlines the process and avoids the hassle of closing two times. Compared to the double-close strategy, assignment contracts require less paperwork and are usually less costly (because there is only one closing occurring, rather than two separate transactions).

On the downside, the wholesaler has to sell the property as-is, because they don’t own it at any point and they cannot make repairs or renovations to make the property look more attractive to a potential buyer. Financing may be much more difficult for the end buyer because many mortgage lenders won’t work with assigned contracts. Purchase Agreements also have expiration dates, which means the wholesaler has a limited window of time to find an end buyer and get the deal done.

Being successful with assignment contracts usually comes down to excellent marketing, networking, and communication between all parties involved. It’s all about developing strategies to find the right properties and having a solid network of investors you can assign them to quickly.

It’s also critical to be aware of any applicable laws in the jurisdiction where the wholesaler is working and holding any licenses required for these kinds of real estate transactions.

Related terms

Double closing, wholesaling (real estate wholesaling), transactional funding.

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Assignment of Contract – Assignable Contract Basics for Real Estate Investors

What is assignment of contract? Learn about this wholesaling strategy and why assignment agreements are the preferred solution for flipping real estate contracts.

Beginners to investing in real estate and wholesaling must navigate a complex landscape littered with confusing terms and strategies. One of the first concepts to understand before wholesaling is assignment of contract, also known as assignment of agreement or “flipping real estate contracts.”  

An assignment contract is the most popular exit strategy for wholesalers, and it isn’t as complicated as it may seem. What does assignment of contract mean? How can it be used to get into wholesaling? Here’s what you need to know.

What Is Assignment of Contract?

How assignment of contract works in real estate wholesaling, what is an assignment fee in real estate, assignment of agreement pros & cons, assignable contract faqs.

• Transactly Saves Time. Learn How Now!

Assignment of real estate purchase and sale agreement, or simply assignment of agreement or contract, is a real estate wholesale strategy that facilitates a sale between the property owner and the end buyer.

This strategy is also known as flipping real estate contracts because that’s essentially how it works:

• The wholesaler finds a property that’s already discounted or represents a great deal and enters into a contract with the seller,
• The contract contains an assignment clause that allows the wholesaler to assign the contract to someone else (if they choose to!), then
• The wholesaler can assign the contract to another party and receive an assignment fee when the transaction closes.

Assignment of contract in real estate is a popular strategy for beginners in real estate investment because it requires very little or even no capital. As long as you can find an interested buyer, you do not need to come up with a large sum of money to buy and then resell the property – you are only selling your right to buy it .

An assignment contract passes along your purchase rights as well as your contract obligations. After the contract assignment, you are no longer involved in the transaction with no right to make claims or responsibilities to get the transaction to closing.

Until you assign contract to someone else, however, you are completely on the hook for all contract responsibilities and rights.

This means that you are in control of the deal until you decide to assign the contract, but if you aren’t able to get someone to take over the contract, you are legally obligated to follow through with the sale .

Assignment of Contract vs Double Closing

Double closing and assignment of agreement are the two main real estate wholesaling exit strategies. Unlike the double closing strategy, an assignment contract does not require the wholesaler to purchase the property.

Assignment of contract is usually the preferred option because it can be completed in hours and does not require you to fund the purchase . Double closings take twice as much work and require a great deal of coordination. They are also illegal in some states.

Ready to see how an assignment contract actually works? Even though it has a low barrier to entry for beginner investors, the challenges of completing an assignment of contract shouldn’t be underestimated. Here are the general steps involved in wholesaling.

Step #1. Find a seller/property

The process begins by finding a property that you think is a good deal or a good investment and entering into a purchase agreement with the seller. Of course, not just any property is suitable for this strategy. You need to find a motivated seller willing to accept an assignment agreement and a price that works with your strategy. Direct mail marketing, online marketing, and checking the county delinquent tax list are just a few possible lead generation strategies you can employ.

Step #2: Enter into an assignable contract

The contract with the seller will be almost the same as a standard purchase agreement except it will contain an assignment clause.

An important element in an assignable purchase contract is “ and/or assigns ” next to your name as the buyer . The term “assigns” is used here as a noun to refer to a potential assignee. This is a basic assignment clause authorizing you to transfer your position and rights in the contract to an assignee if you choose.

The contract must also follow local laws regulating contract language. In some jurisdictions, assignment of contract is not allowed. It’s becoming increasingly common for wholesalers to assign agreements to an LLC instead of an individual. In this case, the LLC would be under contract with the seller. This can potentially bypass lender objections and even anti-assignment clauses for distressed properties. Rather than assigning the contract to someone else, the investor can reassign their interest in the LLC through an “assignment of membership interest.”

Note: even the presence of an assignment clause can make some sellers nervous or unwilling to make a deal . The seller may be picky about whom they want to buy the property, or they may be suspicious or concerned about the concept of assigning a contract to an unknown third party who may or may not be able to complete the sale.

The assignment clause should always be disclosed and explained to the seller. If they are nervous, they can be assured that they will still get the agreed-upon amount.

Step #3. Submit the assignment contract for a title search

Once you are under contract, you must typically submit the contract to a title company to perform the title search. This ensures there are no liens attached to the property.

Step #4. Find an end buyer to assign the contract

Next is the most challenging step: finding a buyer who can fulfill the contract’s original terms including the closing date and purchase price.

Successful wholesalers build buyers lists and employ marketing campaigns, social media, and networking to find a good match for an assignable contract.

Once you locate an end buyer, your contract should include earnest money the buyer must pay upfront. This gives you some protection if the buyer breaches the contract and, potentially, causes you to breach your contract with the seller. With a non-refundable deposit, you can be sure your earnest money to the seller will be covered in a worst-case scenario.

You can see an assignment of contract example here between an assignor and assignee.

Step #5. Receive your assignment fee

The final step is receiving your assignment fee. This fee is your profit from the transaction, and it’s usually paid when the transaction closes.

The assignment fee is how the wholesaler makes money through an assignment contract. This fee is paid by the end buyer when they purchase the right to buy the property as compensation for being connected to the original seller. Assignment contracts should clearly spell out the assignment fee and how it will be paid.

An assignment fee in real estate replaces the broker or Realtor fee in a typical transaction as the assignor or investor is bringing together the seller and end buyer.

The standard real estate assignment fee is $5,000 . However, it varies by transaction and calculating the assignment fee may be higher or lower depending on whether the buyer is buying and holding the property or rehabbing and flipping.

The assignment fee is not always a flat amount. The difference between the agreed-upon price with the seller and the end buyer is the profit you stand to earn as the assignor. If you agreed to purchase the property for $150,000 from the seller and assign the contract to a buyer for $200,000, your assignment fee or profit would be $50,000.

In most cases, an investor receives a deposit when the Assignment of Purchase and Sale Agreement is signed with the rest paid at closing.

Be aware that assignment agreements can have a bad reputation . This is usually the case when the end buyer and seller are unsatisfied, realizing they could have sold higher or bought lower and essentially paid thousands to an investor who never even wanted to buy the property.

Opting for the standard, flat assignment fee is much more readily accepted by sellers and buyers as it’s comparable to a real estate agent’s commission or even much lower and the parties can avoid working with an agent.

Real estate investors enjoy many benefits of an assignment of contract:

• This strategy requires little or no capital which makes it a popular entry to wholesaling as investors learn the ropes.
• Investors are not added to the title chain and never own the property which reduces costs and the amount of time the deal takes.
• An assignment of agreement is easier and faster than double closing which requires two separate closings and two sets of fees and disclosures.
• Wholesaling can be a great tool to expand an investor’s network for future opportunities.

As with most things, there are important drawbacks to consider. Before jumping into wholesaling and flipping real estate contracts, consider the downsides .

• It can be difficult to work with sellers and buyers who are not familiar with wholesaling or assignment agreements.
• Some sellers avoid or decline assignment of contract offers because they are suspicious of the arrangement, think it is too risky, or want to know who they are selling to.
• There is a limited time to find an end buyer. Without a reliable buyer’s list, it can be very challenging to find a viable end buyer before the closing date.
• The end buyer may back out at the last minute. This may happen if they do not have owner’s rights until the contract is assigned or they do not want to pay an assignment fee.
• Not all properties are eligible for wholesaling like HUD and REO properties. There may be anti-assignment clauses or other hurdles. It is possible to get around this by purchasing the property with an LLC which can then be sold, but this is a level of complication that many wholesalers want to avoid.
• Assignors do not have owner’s rights. When the property is under contract, investors cannot make repairs or improvements. This makes it harder to assign a contract for a distressed property in poor condition.
• It can be hard to confirm an end buyer is qualified. The end buyer is responsible for paying the agreed upon price set by the seller and assignor. Many lenders do not handle assignment agreements which usually means turning to all-cash end buyers. Depending on the market, they can be hard to find.

In the worst-case scenario, if a wholesaling deal falls through because the end buyer backs out, the investor or assignor is still responsible for buying the property and must follow through with the purchase agreement. If you do not, you are in breach of contract and lose the earnest money you put down.

To avoid this worst-case scenario, be prepared with a good buyer’s list. You should only put properties under contract that you consider a good deal and you can market to other investors or homeowners. You may be able to get more time by asking for an extension to the assignment of contract while you find another buyer or even turn to other wholesalers to see if they have someone who would be a good fit.

What is the difference between assignor vs assignee?

In an assignment clause, the assignor is the buyer who then assigns the contract to an assignee. The assignee is the end buyer or final buyer who becomes the owner when the transaction closes. After the assignment, contract rights and obligations are transferred from the assignor to the assignee.

What Is an assignable contract?

An assignable contract in real estate is a purchase agreement that allows the buyer to assign their rights and obligations to another party before the contract expires. The assignee then becomes obligated to meet the terms of the contract and, at closing, get title to the property.

Is Assignment of Agreement Legal?

Assignment of contract is legal as long as state regulations are followed and it’s an assignable contract. The terms of your agreement with the seller must allow for the contract to be assumed. To be legal and enforceable, the following general requirements must be met.

• The assignment does not violate state law or public policy. In some states and jurisdictions, contract assignments are prohibited.
• There is no assignment clause prohibiting assignment.
• There is written consent between all parties.
• The property does not have restrictions prohibiting assignment. Some properties have deed restrictions or anti-assignment clauses prohibiting assignment of contract within a specific period of time. This includes HUD properties, short sales, and REO properties which usually prohibit a property from being resold for 90 days. There is potentially a way around these non-assignable contracts using an LLC.

Can a non-assignable contract still be assigned?

Even an non-assignable contract can become an assignable contract in some cases. A common approach is creating an agreement with an LLC or trust as the purchaser. The investor can then assign the entity to someone else because the contractual rights and obligations are the entity’s.

Assignment agreements are not as complicated as they may sound, and they offer an excellent entry into real estate investing without significant capital. A transaction coordinator at Transactly can be an invaluable solution, no matter your volume, to keep your wholesaling business on track and facilitate every step of the transaction to closing – and your assignment fee!

Adam Valley

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Understanding assignment in real estate.

In the context of real estate contracts, assignment refers to the transfer of contractual rights and obligations from one party (the assignor) to another (the assignee). This process enables the assignee to step into the shoes of the assignor, assuming the rights and responsibilities outlined in the original contract. Common examples of contractual assignments in real estate include the transfer of purchase agreements, development rights, or lease agreements.

Assignment of Leases

In property leasing, assignment occurs when a tenant transfers their leasehold interest to another party. The original tenant, known as the assignor, effectively passes on their rights and obligations under the lease to the new tenant, referred to as the assignee. This transfer typically requires the consent of the landlord and may involve a formal assignment agreement to solidify the terms of the transfer.

Legal Implications and Considerations

Assignments in real estate often carry legal implications that necessitate careful consideration. Contractual assignments require adherence to the terms of the original contract and may involve obtaining consent from the other party involved. In the case of lease assignments, landlords may have specific criteria and approval processes that must be followed to facilitate a valid transfer of the lease.

Benefits and Opportunities

For parties involved in real estate transactions, assignments can present valuable opportunities. Assignors may seek to offload contractual obligations or transfer lease responsibilities, while assignees can gain access to pre-negotiated terms, favorable lease conditions, or lucrative contractual arrangements.

In conclusion, the concept of 'assignment' in real estate represents the transfer of rights and interests, shaping the dynamics of property contracts, lease agreements, and various transactions within the industry. Understanding the implications and applications of assignments is crucial for navigating real estate dealings with clarity and compliance. Whether as a means of restructuring contractual relationships or facilitating property transfers, the concept of 'assignment' underscores the dynamic nature of real estate transactions and the adaptability it affords to stakeholders within the market.

What are the key legal considerations in real estate assignments?

How can assignments benefit both assignors and assignees in real estate?

Can you provide examples of lease assignments in real estate?

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How To Navigate The Real Estate Assignment Contract

What is assignment of contract?

Assignment of contract vs double close

How to assign a contract

Assignment of contract pros and cons

Even the most left-brained, technical real estate practitioners may find themselves overwhelmed by the legal forms that have become synonymous with the investing industry. The assignment of contract strategy, in particular, has developed a confusing reputation for those unfamiliar with the concept of wholesaling. At the very least, there’s a good chance the “assignment of contract real estate” exit strategy sounds more like a foreign language to new investors than a viable means to an end.

A real estate assignment contract isn’t as complicated as many make it out to be, nor is it something to shy away from because of a lack of understanding. Instead, new investors need to learn how to assign a real estate contract as this particular exit strategy represents one of the best ways to break into the industry.

In this article, we will break down the elements of a real estate assignment contract, or a real estate wholesale contract, and provide strategies for how it can help investors further their careers. [ Thinking about investing in real estate? Register to attend a FREE online real estate class and learn how to get started investing in real estate. ]

What Is A Real Estate Assignment Contract?

A real estate assignment contract is a wholesale strategy used by real estate investors to facilitate the sale of a property between an owner and an end buyer. As its name suggests, contract assignment strategies will witness a subject property owner sign a contract with an investor that gives them the rights to buy the home. That’s an important distinction to make, as the contract only gives the investor the right to buy the home; they don’t actually follow through on a purchase. Once under contract, however, the investor retains the sole right to buy the home. That means they may then sell their rights to buy the house to another buyer. Therefore, when a wholesaler executes a contact assignment, they aren’t selling a house but rather their rights to buy a house. The end buyer will pay the wholesale a small assignment fee and buy the house from the original buyer.

The real estate assignment contract strategy is only as strong as the contracts used in the agreement. The language used in the respective contract is of the utmost importance and should clearly define what the investors and sellers expect out of the deal.

There are a couple of caveats to keep in mind when considering using sales contracts for real estate:

Contract prohibitions: Make sure the contract you have with the property seller does not have prohibitions for future assignments. This can create serious issues down the road. Make sure the contract is drafted by a lawyer that specializes in real estate assignment contract law.

Property-specific prohibitions: HUD homes (property obtained by the Department of Housing and Urban Development), real estate owned or REOs (foreclosed-upon property), and listed properties are not open to assignment contracts. REO properties, for example, have a 90-day period before being allowed to be resold.

What Is An Assignment Fee In Real Estate?

An assignment fee in real estate is the money a wholesaler can expect to receive from an end buyer when they sell them their rights to buy the subject property. In other words, the assignment fee serves as the monetary compensation awarded to the wholesaler for connecting the original seller with the end buyer.

Again, any contract used to disclose a wholesale deal should be completely transparent, and including the assignment fee is no exception. The terms of how an investor will be paid upon assigning a contract should, nonetheless, be spelled out in the contract itself.

The standard assignment fee is $5,000. However, every deal is different. Buyers differ on their needs and criteria for spending their money (e.g., rehabbing vs. buy-and-hold buyers). As with any negotiations , proper information is vital. Take the time to find out how much the property would realistically cost before and after repairs. Then, add your preferred assignment fee on top of it.

Traditionally, investors will receive a deposit when they sign the Assignment of Real Estate Purchase and Sale Agreement . The rest of the assignment fee will be paid out upon the deal closing.

Assignment Contract Vs Double Close

The real estate assignment contract strategy is just one of the two methods investors may use to wholesale a deal. In addition to assigning contracts, investors may also choose to double close. While both strategies are essentially variations of a wholesale deal, several differences must be noted.

A double closing, otherwise known as a back-to-back closing, will have investors actually purchase the home. However, instead of holding onto it, they will immediately sell the asset without rehabbing it. Double closings aren’t as traditional as fast as contract assignment, but they can be in the right situation. Double closings can also take as long as a few weeks. In the end, double closings aren’t all that different from a traditional buy and sell; they transpire over a meeter of weeks instead of months.

Assignment real estate strategies are usually the first option investors will want to consider, as they are slightly easier and less involved. That said, real estate assignment contract methods aren’t necessarily better; they are just different. The wholesale strategy an investor chooses is entirely dependent on their situation. For example, if a buyer cannot line up funding fast enough, they may need to initiate a double closing because they don’t have the capital to pay the acquisition costs and assignment fee. Meanwhile, select institutional lenders incorporate language against lending money in an assignment of contract scenario. Therefore, any subsequent wholesale will need to be an assignment of contract.

Double closings and contract assignments are simply two means of obtaining the same end. Neither is better than the other; they are meant to be used in different scenarios.

Flipping Real Estate Contracts

Those unfamiliar with the real estate contract assignment concept may know it as something else: flipping real estate contracts; if for nothing else, the two are one-in-the-same. Flipping real estate contracts is simply another way to refer to assigning a contract.

Is An Assignment Of Contract Legal?

Yes, an assignment of contract is legal when executed correctly. Wholesalers must follow local laws regulating the language of contracts, as some jurisdictions have more regulations than others. It is also becoming increasingly common to assign contracts to a legal entity or LLC rather than an individual, to prevent objections from the bank. Note that you will need written consent from all parties listed on the contract, and there cannot be any clauses present that violate the law. If you have any questions about the specific language to include in a contract, it’s always a good idea to consult a qualified real estate attorney.

When Will Assignments Not Be Enforced?

In certain cases, an assignment of contract will not be enforced. Most notably, if the contract violates the law or any local regulations it cannot be enforced. This is why it is always encouraged to understand real estate laws and policy as soon as you enter the industry. Further, working with a qualified attorney when crafting contracts can be beneficial.

It may seem obvious, but assignment contracts will not be enforced if the language is used incorrectly. If the language in a contract contradicts itself, or if the contract is not legally binding it cannot be enforced. Essentially if there is any anti-assignment language, this can void the contract. Finally, if the assignment violates what is included under the contract, for example by devaluing the item, the contract will likely not be enforced.

How To Assign A Real Estate Contract

A wholesaling investment strategy that utilizes assignment contracts has many advantages, one of them being a low barrier-to-entry for investors. However, despite its inherent profitability, there are a lot of investors that underestimate the process. While probably the easiest exit strategy in all of real estate investing, there are a number of steps that must be taken to ensure a timely and profitable contract assignment, not the least of which include:

Find the right property

Acquire a real estate contract template

Submit the contract

Assign the contract

Collect the fee

1. Find The Right Property

You need to prune your leads, whether from newspaper ads, online marketing, or direct mail marketing. Remember, you aren’t just looking for any seller: you need a motivated seller who will sell their property at a price that works with your investing strategy.

The difference between a regular seller and a motivated seller is the latter’s sense of urgency. A motivated seller wants their property sold now. Pick a seller who wants to be rid of their property in the quickest time possible. It could be because they’re moving out of state, or they want to buy another house in a different area ASAP. Or, they don’t want to live in that house anymore for personal reasons. The key is to know their motivation for selling and determine if that intent is enough to sell immediately.

With a better idea of who to buy from, wholesalers will have an easier time exercising one of several marketing strategies:

Direct Mail

Real Estate Meetings

Local Marketing

2. Acquire A Real Estate Contract Template

Real estate assignment contract templates are readily available online. Although it’s tempting to go the DIY route, it’s generally advisable to let a lawyer see it first. This way, you will have the comfort of knowing you are doing it right, and that you have counsel in case of any legal problems along the way.

One of the things proper wholesale real estate contracts add is the phrase “and/or assigns” next to your name. This clause will give you the authority to sell the property or assign the property to another buyer.

You do need to disclose this to the seller and explain the clause if needed. Assure them that they will still get the amount you both agreed upon, but it gives you deal flexibility down the road.

3. Submit The Contract

Depending on your state’s laws, you need to submit your real estate assignment contract to a title company, or a closing attorney, for a title search. These are independent parties that look into the history of a property, seeing that there are no liens attached to the title. They then sign off on the validity of the contract.

4. Assign The Contract

Finding your buyer, similar to finding a seller, requires proper segmentation. When searching for buyers, investors should exercise several avenues, including online marketing, listing websites, or networking groups. In the real estate industry, this process is called building a buyer’s list, and it is a crucial step to finding success in assigning contracts.

Once you have found a buyer (hopefully from your ever-growing buyer’s list), ensure your contract includes language that covers earnest money to be paid upfront. This grants you protection against a possible breach of contract. This also assures you that you will profit, whether the transaction closes or not, as earnest money is non-refundable. How much it is depends on you, as long as it is properly justified.

5. Collect The Fee

Your profit from a deal of this kind comes from both your assignment fee, as well as the difference between the agreed-upon value and how much you sell it to the buyer. If you and the seller decide you will buy the property for $75,000 and sell it for $80,000 to the buyer, you profit $5,000. The deal is closed once the buyer pays the full $80,000.

Assignment of Contract Pros

For many investors, the most attractive benefit of an assignment of contract is the ability to profit without ever purchasing a property. This is often what attracts people to start wholesaling, as it allows many to learn the ropes of real estate with relatively low stakes. An assignment fee can either be determined as a percentage of the purchase price or as a set amount determined by the wholesaler. A standard fee is around $5,000 per contract.

The profit potential is not the only positive associated with an assignment of contract. Investors also benefit from not being added to the title chain, which can greatly reduce the costs and timeline associated with a deal. This benefit can even transfer to the seller and end buyer, as they get to avoid paying a real estate agent fee by opting for an assignment of contract. Compared to a double close (another popular wholesaling strategy), investors can avoid two sets of closing costs. All of these pros can positively impact an investor’s bottom line, making this a highly desirable exit strategy.

Assignment of Contract Cons

Although there are numerous perks to an assignment of contract, there are a few downsides to be aware of before searching for your first wholesale deal. Namely, working with buyers and sellers who may not be familiar with wholesaling can be challenging. Investors need to be prepared to familiarize newcomers with the process and be ready to answer any questions. Occasionally, sellers will purposely not accept an assignment of contract situation. Investors should occasionally expect this, as to not get discouraged.

Another obstacle wholesalers may face when working with an assignment of contract is in cases where the end buyer wants to back out. This can happen if the buyer is not comfortable paying the assignment fee, or if they don’t have owner’s rights until the contract is fully assigned. The best way to protect yourself from situations like this is to form a reliable buyer’s list and be upfront with all of the information. It is always recommended to develop a solid contract as well.

Know that not all properties can be wholesaled, for example HUD houses. In these cases, there are often anti-assigned clauses preventing wholesalers from getting involved. Make sure you know how to identify these properties so you don’t waste your time. Keep in mind that while there are cons to this real estate exit strategy, the right preparation can help investors avoid any big challenges.

Assignment of Contract Template

If you decide to pursue a career wholesaling real estate, then you’ll want the tools that will make your life as easy as possible. The good news is that there are plenty of real estate tools and templates at your disposal so that you don’t have to reinvent the wheel! For instance, here is an assignment of contract template that you can use when you strike your first deal.

As with any part of the real estate investing trade, no single aspect will lead to success. However, understanding how a real estate assignment of contract works is vital for this business. When you comprehend the many layers of how contracts are assigned—and how wholesaling works from beginning to end—you’ll be a more informed, educated, and successful investor.

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Assigning Real Estate Contracts: Everything You Need to Know

Assigning real estate contracts refers to a method of earning money from buying and selling real estate. You find a seller who is eager to sell their property at a price that is far below its market value. 3 min read updated on July 10, 2020

Assigning real estate contracts refers to a method of earning money from buying and selling real estate. You find a seller who is eager to sell their property at a price that is far below its market value. Then, you find a buyer willing to pay a higher price for it.

How Contract Assignment Works

The first thing you need to do for contract assignment is to find a motivated seller. This is a person who owns a property, and for some reason, needs to sell in a hurry. This is generally because of a problem they are having, such as needing to move to a new home quickly. You'll need to be able to tell the difference between this sort of seller and someone who isn't in so much of a hurry to sell, and perhaps just wants to know what the property is worth.

You can find motivated sellers by placing ads in the newspaper, marketing on the internet, or sending direct mail. A combination of strategies works best.

The next thing you need to do is to obtain an assignment contract document. You can find templates on the web, but it's a good idea to have an attorney look it over before signing anything. That way, you will know that everything is completely legal. You will also be able to use that attorney if things don't work out as planned.

After the contract is signed, you submit it to a title company or an attorney who handles real estate closings. They will then do a title search. This ensures there are no existing liens against the property. This step is crucial because you do not want to buy a property that has a problem with the title. The title company is objective and independent and therefore makes sure everything is fair and legal.

At this point, you may search for a buyer. This will require more marketing strategies and can be a difficult process, but when you do find a buyer, you can move on to the next step - closing on the property. You'll need to collect a non-refundable deposit known as “earnest money” to make sure the buyer won't back out. If the buyer does change their mind, you get to keep the earnest money. This amount can be determined by you or the buyer.

Next, you get paid! The amount you receive will cover the amount you agreed to pay the property seller, along with an amount you get to keep in return for finding the buyer and making the transaction happen.

While this process takes place, you should make sure the seller understands how the process works , and that you will make a profit from the transaction. Otherwise, either the seller or buyer may decide they don't like the idea of your profiting from the sale and may back out. Reassure the seller that they are still getting the amount agreed upon for the sale.

Most contract assignments are done for $5,000 profit or less, but you can do it for a higher amount if you choose. If problems arise, it's possible to do a double or simultaneous closing, thereby keeping both parts of the sale separate and anonymous. Some title companies may not agree to do this, so if it becomes an issue, you should discuss it in advance.

Drawbacks of Contract Assignment

Contract assignment, or wholesaling, can be a  profitable venture , but there are a few pitfalls to watch out for, such as:

• You cannot make any repairs or renovations to the property because you do not own it at any point.
• You cannot offer any type of financing to the buyer.
• You must get the sale accomplished within a short amount of time before the contract expires.
• The process of closing on the property is detailed and can be complicated.
• You must find a buyer who is willing to pay in cash because it's hard to find a lender who will approve a mortgage for an assigned contract.

You also need to check the laws in your state, because in some states it is not legal to market a property that you don't own.

If you need more information or help with assigning real estate contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

Content Approved by UpCounsel

• Property Contracts
• Sample Real Estate Contracts
• Land Sale Contracts
• Commercial Real Estate Contract Provisions
• Deed Contract Agreement
• Assignment Of Contracts
• Define Subject to Contract
• As Is Sales Contract
• Bill of Sale Land Contract
• Extension Addendum to Contract

The Ultimate Dictionary of Real Estate Terms You Should Know

Updated: August 13, 2021

Published: October 25, 2018

How many hours a week do you wave farewell to while answering buyer or seller questions about basic real estate concepts and terminology? My guess is, a lot. It’s part of a realtor’s job to guide their clients through a confusing legal process as they make what’s likely the biggest purchase of their lives.

So, what if you could make it just a little easier on yourself -- and give them fast and easy access to the answers they need? Hopefully, I can help.

I’ve pulled together a comprehensive dictionary of real estate terms and definitions. From the obscure to the obvious, your clients will find all the information they need below. And you might even find it helpful as you brush up on a term or two.

Real Estate Terms and Definitions

Acceleration clause.

Also known as an acceleration covenant , this is a contract provision requiring the borrower to repay all of their outstanding loan to a lender if certain requirements -- outlined by the lender -- aren’t met.

Active contingent

When a seller accepts an offer from a buyer, that offer is contingent upon the buyer’s ability to meet certain conditions before finalization of the sale. Contingencies might include the buyer selling their home, receiving mortgage approval, or reaching an agreement with the seller on the home inspection.

Active under contract

A house is listed as “ active under contract ” when the seller has accepted an offer with contingencies, but still wants the house to be listed as active. In this situation, the seller is also likely accepting backup offers in case their current offer fails to meet its contingencies.

If a buyer or seller want to change an existing contract, they might add an addendum outlining the specific part of the contract they’d like to adjust and the parameters of that change. The rest of the contract stays the same, regardless of the addendum.

Adjustable-rate mortgage (ARM)

The interest rate for an adjustable-rate mortgage changes periodically. You might start with lower monthly payments than you would with a fixed-rate mortgage, but fluctuating interest rates will likely make those monthly payments rise in the future.

Adjustment date

This is the date your mortgage begins to accrue interest (though you might not have made a mortgage payment yet). The adjustment date usually falls on the first day of the month after mortgage funds are advanced or dispersed to the borrower.

Amortization

Amortization is the schedule of your mortgage payments spread out over time. In real estate, a buyer's amortization schedule is usually one monthly payment scheduled over a 15- or 30-year period of time.

Annual percentage rate (APR)

The annual percentage rate (APR) is the amount of interest charged on your loan every year.

An appraisal on your home is an unbiased estimate of how much a home is worth. When buying a home, the lender requires an appraisal by a third party ( the appraiser ) to make sure the loan amount requested is accurate. If the home’s appraised value is below what the buyer has offered, the lender may request the buyer pay the difference in cost.

Appreciation

Appreciation is the amount a home increases in value over time. To calculate a home’s likely appreciation rate, add one to the annual appreciation rate, raise this to a power equal to the number of years you’d like to estimate, then multiply that by the current value of the property.

Assessed value

An assessment is used to determine how much in taxes the owner of a property will pay. An assessor calculates the assessment of a home’s value by looking at comparable homes in your area and reviewing an inspection of the home in question.

An assignment is when the seller of a property signs over rights and obligations to that property to the buyer before the official closing.

Assumable mortgage

Assumption is when a seller transfers all terms and conditions of a mortgage to a buyer. The buyer takes on the seller’s remaining debt instead of taking out a new mortgage of their own.

Balloon mortgage

Instead of a traditional fixed-rate mortgage in which the owner pays on the loan in installments, a balloon mortgage is paid in one lump sum (e.g., the balloon payment). It’s usually associated with investment or construction projects that are issued for the short term and don’t require collateral.

Bi-weekly mortgage

A bi-weekly mortgage payment means a homeowner pays their monthly mortgage payment in two monthly installments instead of one. With a bi-weekly mortgage, you'll make 26 payments per year instead of 12. The end result is that you'll pay the equivalent of 13 monthly payments each year lowering interest rates and your principal balance at a faster pace.

Bridge loan

A bridge loan is a short-term loan a homeowner takes out against their property to finance the purchase of another property. It’s usually taken out for a period of a few weeks to up to three years.

A broker has passed a broker’s license exam and received education beyond what the state requires of real estate agents. They understand real-estate law, construction, and property management. Real estate agents are required to work under the supervision of a broker.

A buydown is a mortgage-financing technique lowering the buyer’s interest rate for anywhere from a few years to the lifetime of the loan. Usually, the property seller or contractor makes payments to the mortgage lender lowering the buyer’s monthly interest rates, which, in turn, lowers their monthly payments.

Call option

A call option is a contract giving one party the right to buy and another party the right to sell a piece of property at a future time and specific price.

Cash-out refinance

A cash-out refinance , also known as a cash-out refi, is when a homeowner refinances their mortgage for more than it’s worth and withdraws the difference in cash. To be eligible for this kind financing, a borrower usually needs at least 20% in equity.

Certificate of eligibility

During the VA loan process , lenders require veterans to show proof they’ve met the minimum service requirement to qualify for a VA loan.

Certificate of reasonable value

A certificate of reasonable value (CRV) is issued by the Department of Veterans Affairs and is required for veterans to receive a VA loan. It establishes the maximum value of the property and therefore the maximum size of the loan.

Chain of title

Like a Blue Book for homes, the chain of title is the documentation of all past ownership of a property. It runs from the present owner to the very first owner of the property.

Clear title

Also known as a "just title," "good title," or a "free and clear title" -- a clear title doesn’t have any kind of lien or levy from creditors. It means there's no question of legal ownership of the property such as building code violations or bad surveys.

Closing is the final stage of the real estate transaction. The date is agreed upon when both the buyer and seller go under contract on the home. On the closing date, the property is legally transferred from seller to buyer.

Closing costs

Closing costs are usually comprised of between 2-5% of the total purchase price of the home. According to a recent survey by Zillow, the average homebuyer pays approximately $3,700 in closing costs. These fees are paid on or by the closing date.

Co-borrower

If a buyer is having trouble getting approved for a loan, they can elicit the help of a co-borrower . This person is usually a family member or friend who's added to the mortgage and guarantees the loan. They're listed on the title, have ownership interest, sign loan documents, and are obligated to pay monthly mortgage payments if the buyer is unable to.

Real estate commission is generally 5-6% of the home’s sale price. That commission is usually split between the buyer’s and seller’s agents and is paid by the seller at the time of closing.

Common area assessments

If you pay a monthly fee towards a Homeowners Association (HOA), part of that fee likely goes toward a common area assessment to maintain an area open to the community.

Community property

Community property refers to property acquired by a married couple and owned equally by both spouses.

Comparable sales

Comparable sales are used by an appraiser to establish how much a home is worth based on what other similar homes in the area have sold for recently. Only homes that have legally closed count as a comp -- and most lenders and insurance providers require appraisers to use at least three closed sales.

Construction loan

A construction loan -- or self-build loan -- is a short-term loan used to finance the construction of a home or real estate project. This type of loan covers project costs before long-term funding can be financed.

Contingency

If a property is contingent, or the contract contains a contingency , certain events must transpire or the contract can be considered null. A contingency might be that the home must past an appraisal or receive a clean inspection.

The sale of a home could also be contingent on the buyer selling their home by a specified date. If either the buyer or seller fail to meet the expectations of the contingency, either party can exit the contract.

Contingent vs. pending

When a property is contingent, it means the owner has accepted an offer -- but certain contractual expectations must be met or the offer will be void. If all contingencies are met, the property changes status to “pending.” While contingent offers are still considered active listings, pending offers are taken off the market and other offers will not be entertained.

Conventional mortgage

A conventional mortgage is a loan not guaranteed or insured by the federal government. These borrowers usually make larger down payments (at least 20%), don’t require mortgage insurance, and are at a lower risk of defaulting on their home loan payment.

Convertible ARM

A convertible adjustable rate mortgage (ARM) allows buyers to take advantage of low interest rates by receiving a loan at a “teaser” loan interest rate.

Their monthly mortgage payment stays the same, but interest rates fluctuate (usually every six months). The borrower has the option of converting their ARM to a fixed-rate mortgage, but there are generally fees for the switch.

Cost of funds index (COFI)

A cost of funds index is an average of the regional interest expenses acquired by financial institutions. It’s used to calculate variable rate loans.

A housing deed is the legal document transferring a title from the seller to the buyer. It must be a written document and is sometimes referred to as the vehicle of the property interest transfer.

Deed-in-lieu of foreclosure

A deed-in-lieu of foreclosure is a document transferring the title of a property from a homeowner to the bank that holds the mortgage. A homeowner might submit a deed-in-lieu of foreclosure if the bank has denied them a loan modification or short sale. However, the bank can deny the request for a deed-in-lieu (and often do).

If a homeowner defaults on their loan, it means they have not paid the sum they agreed to. Typically, a mortgage default means the homeowner hasn’t made a home loan payment in 90 days or more.

Delinquency

A mortgage is considered delinquent when a scheduled payment is not made. If a payment is more than 30 days late, a lender might begin collection or foreclosure proceedings.

Discount points

Discount points are also known as mortgage points. They’re fees homebuyers pay directly to the lender at the time of closing in exchange for reduced interest rates which can lower monthly mortgage payments.

Down payment

The down payment is the amount of cash a homebuyer pays at the time of closing. Typical home loans require a 20% down payment. Some conforming loans will accept a 5% down payment, and FHA loans will accept a 3.5% down payment.

Due-on-sale clause

A due-on-sale clause protects lenders against below-market interest rates. It's a contract provision requiring the seller of the property to repay the mortgage in full when the property is next sold. It is also called an acceleration clause.

Earnest money deposit

Earnest money is a deposit (usually 1-2% of the home’s total purchase price) made by a homebuyer at the time they enter into a contract with a seller. Earnest money demonstrates the buyer's interest in the property and is generally deducted from your total down payment and closing costs.

An easement grants someone else the legal right to use another person’s land or property while leaving the title in the owner's name.

Eminent domain

The right of eminent domain gives the government the ability to use private property for public purposes. It's only exercisable when and if the government fairly compensates the owner of the property.

Encroachment

When a property owner violates the rights of a neighbor by building or adding on to a structure that extends onto a neighbor’s land or property line, that is called encroachment .

Encumbrance

A real estate encumbrance is any claim against a property that restricts its use or transfer, including an easement or property tax lien.

Equal Credit Opportunity Act

The Equal Credit Opportunity Act (ECOA) was enacted on October 28, 1974 and rules it unlawful for creditors to discriminate against applications because of race, color, religion, national origin, sex, marital status, age, or because they receive public assistance.

Home equity is the part of your property you actually own. While you do “own” your home, your mortgage lender has interest in the property until it’s paid off.

To calculate your home’s equity, subtract your outstanding loan balance from the current market value of your property. Home equity will increase as you pay down your loan or the market value of your home increases.

Escrow is part of the homebuying process. It happens when a third party holds something of value during the transaction. Most often, the “value” the third party holds onto is the buyer’s earnest money check. When the transaction is complete (usually at closing), the third party will release those funds to the seller.

Examination of title

A title examination reviews all public records tied to a property. It generally reviews all previous deeds, wills, and trusts to ensure the title has passed cleanly and legally to every new owner.

Exclusive listing

An exclusive listing is used to motivate an agent to sell a property quickly -- within a specific number of months. If they meet that goal, the agent gains a commission regardless of how a buyer is found.

Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) was enacted in 1970 and ensures fairness, accuracy, and privacy of personal information contained in files maintained by credit reporting agencies. The goal of this act is to protect consumers from having misinformation used against them.

Fair market value

A property’s fair market value is its accurate valuation in a free and open market under the condition that buyers and sellers are knowledgeable about the asset, acting in their best interests, and free of undue pressure to complete the transaction.

Fee simple refers to the most common type of property ownership. It means the owner’s rights to the property are indefinite and can be freely transferred or inherited when the owner chooses. It is most often associated with single-family homes, as condominiums and townhomes are purchased with covenants, conditions, and restrictions.

FHA mortgage

Federal Housing Administration (FHA) loans have been around since 1934 and are meant to help first-time homebuyers. The FHA insures the loan, making it easier for lenders to offer the homebuyer a better deal, including a lower down payment (as low as 3.5% of the purchase price), low closing costs, and easier credit qualifying.

Fixed-rate mortgage

A fixed-rate mortgage is one of the most common types of loans. It comes with an interest rate that stays the same for the lifetime of the loan, and provides the borrower with more stability and predictability over the lifetime of their loan.

While mortgage payments can fluctuate as property taxes and homeowner’s insurance change, many consumers prefer the fixed-rate mortgage for its long-term reliability.

For sale by owner

Homes listed as for sales by owner (FSBO) are being sold without the help of a real estate agent. The biggest benefit to the seller is they avoid paying commission fees -- but there are few benefits to the buyer.

Foreclosure

If a homeowner doesn’t make a mortgage payment (usually, for more than 90 days), foreclosure is a legal process during which the owner forfeits all property rights.

If they are unable to pay off outstanding debt on the property or sell it via short sale, the property enters a foreclosure auction. If no sale is made there, the lender takes control of the property.

Home Equity Conversion Mortgage

The Home Equity Conversion Mortgage (HECM) is an FHA reverse mortgage program enabling homeowners to withdraw equity on their home through either a fixed monthly payment, a line of credit, or a combination of the two.

Home equity line of credit

A home equity line of credit (HELOC) provides a revolving credit line that can be helpful in paying for large expenses or consolidating higher-interest rate debt on loans -- like credit cards.

Home inspection

A home inspection is carried out by an objective third party to establish the condition of a property during a real estate transaction. An inspector will report on such things as a home’s heating system, the stability of the foundation, and the condition of the roof. The inspection is meant to identify major issues that might affect the value of the home and the stability of your and your lender’s investment and return.

Homeowner’s association

A homeowner’s association (HOA) is usually found when you purchase a condominium, townhome, or other development property. To purchase the home, you must also join the HOA and pay monthly or yearly HOA fees.

These fees can cover common area maintenance, repairs, and general upkeep. The more amenities your building offers, the higher the HOA fees typically are.

Homeowner’s insurance

When you purchase a home, it's also necessary to purchase homeowner’s insurance to cover any losses or damages you might incur, such as natural disaster, theft, or damage.

It also protects the homeowner from liability against any accidents in the home or on the property. Insurance payments are usually included in your monthly mortgage payments.

Judicial foreclosure

Judicial foreclosures are mandatory in some but not all states. They require all foreclosures go through the court system to confirm the debt is in default before putting the property up for auction. The goal of judicial foreclosures is to protect property owners from corrupt lenders.

Conforming loan limits cap the dollar value that can be backed by government-sponsored programs. A jumbo mortgage exceeds these conforming loan limits, which are tied to local median home values.

Qualifications for these loans are more stringent and the loans themselves are manually underwritten to mitigate risk to the lender.

Lease option

A lease option is like rent-to-own for real estate. It gives the lessee the ability to lease property with the option to buy. It includes a legal agreement with a monthly rental amount due, while also including an option to buy the property for a predetermined price at any time during the length of the agreement.

In real estate, the lender refers to the individual, financial institution, or private group lending money to a buyer to purchase property with the expectation the loan will be repaid with interest, in agreed upon increments, by a certain date.

A property lien is unpaid debt on a piece of property. It's a legal notice and denotes legal action taken by a lender to recover the debt they are owed. It can come from unpaid taxes, a court judgement, or unpaid bills and can slow down the homebuying process when unattended.

A life cap refers to the maximum amount an interest rate on an adjustable rate loan can increase over the lifetime of the loan. A life cap is also known as an absolute interest rate or interest rate ceiling and keeps interest rates from ballooning too high over the term of the loan.

Loan officer

Residential loan officers , or mortgage loan officers, assist the homebuyer with purchasing or refinancing a home. Loan officers are often employed by larger financial institutions and help borrowers choose the right type of loan, compile their loan application, and communicate with appraisers.

Loan origination

Loan origination is the process during which a borrower submits a loan application and a financial institution or lender processes that application. There is usually an origination fee associated with this process.

Loan servicing

Loan servicing is a term for the administrative aspects of maintaining your loan, from the dispersal of the loan to the time it’s paid in full.

Loan servicing includes sending the borrower monthly statements, maintaining payment and balance records, and paying taxes and insurance. Servicing is usually carried out by the lender of the loan, typically a bank or financial institution.

Loan-to-value

The loan-to-value (LTV) ratio is the mortgage loan balance divided by the home’s value. It shows how much you’re borrowing from a lender as a percentage of your home’s appraised value.

The higher your LTV, the riskier you’ll appear during the loan underwriting process because a low down payment denotes less equity or ownership in your property making you more likely to default on your loan.

Lock-in period

The period of time in which a borrower cannot repay their loan in full without incurring a penalty fine by the lender.

A mortgage is the agreement between a borrower and a lender giving the lender the right to the borrower’s property if the borrower is unable to make loan payments (with interest) within an agreed upon timeline.

Mortgage banker

A mortgage banker works directly with a lending institution to provide mortgage funds to a borrower. They can only obtain funds from a specific institution and are responsible for each part of the mortgage process, including property evaluation, financial due diligence, and overseeing the application process.

Mortgage broker

A mortgage broker shops several lenders, acting as a middle man between lending institutions and the borrower. A broker can compare mortgages from several different institutions, giving the borrower a better deal.

Mortgage insurance

If a homebuyer makes a down payment of less than 20% of the purchase price of a home or is the recipient of an FHA or USDA loan, they’ll usually be required to pay mortgage insurance . It lowers the risk of a lender giving you a loan, but it also increases the cost of the loan.

Multiple Listing Service (MLS)

An MLS is a suite of around 700 regional databases containing their own listings. Each database has its own listings, requires agents to pay dues for access, and allows agents to share listings across regions -- without paying dues to each one. It is widely considered the most comprehensive listing service available.

Negative amortization

Amortization refers to the process of paying off a loan with regular payments so the amount you owe on the loan gradually decreases.

Negative amortization happens when the amount you owe continues to rise, regardless of regular payments, because you’re not paying enough to cover the interest.

No cash-out refinance

A no cash-out refinance is a type of loan used to improve the rate the borrower pays on the loan. It might also shorten the lifetime of a loan to benefit the borrower.

In a no cash-out refinance, the borrower refinances an existing mortgage for equal to or less than the outstanding loan balance. The goal is to lower interest rates on the loan or change certain terms of the mortgage.

No-cost mortgage

A no-cost mortgage is a type of refinancing in which the lender pays the borrower’s loan settlement costs and extends a new loan -- usually in exchange for the borrower paying higher interest rates.

The mortgage lender then sells the mortgage to a secondary mortgage market for a higher price because of the high interest rate.

The note rate is the interest rate stated on a mortgage note. It is also commonly referred to as the nominal rate or face interest rate.

Original principal balance

The original principal balance is the amount owed on a mortgage before the first payment has been made.

Origination fee

The fee a borrower pays a lender to cover the costs of processing their loan application.

Owner financing

Owner financing (also known as seller financing) takes place when a borrower finances the purchase of a home through the seller, bypassing conventional mortgage lenders and financial institutions.

A sales is considered “ pending ” if all contingencies have been met and the buyer and seller are moving toward closing. At this point, it’s unlikely the sale will fall through, and the buyer or seller risk losing the earnest money if they walk out on the deal at this point.

Per diem or “per day” fees are charged if a loan isn’t approved by the date the loan was scheduled to be completed. These charges are payable to the lender during closing.

PITI stands for principal, interest, taxes, and insurance, and refers to the sum of each of these charges, typically quoted on a monthly basis.

These costs are calculated and compared to the borrower’s monthly gross income when approving a mortgage loan. A borrowers PITI should generally be less than or equal to 28% of their gross monthly income.

Planned unit development

A planned unit development (PUD) is a housing community made up of single family residences, townhomes, and condominiums -- as well as commercial units.

PUDs offer many common areas owned by the HOA and amenities beyond what normal apartment buildings or townhomes offer, including tennis courts, outdoor playgroun ds, and video intercom systems .

Pre-approval

Before submitting an offer on a home (or even engaging with a real estate agent) you’ll likely be required to get pre-approved . This means a lender has checked your credit, verified your information, and approved you for up to a specific loan amount for a period of up to 90 days.

Pre-qualification

Unlike pre-approval, pre-qualification is more of an estimate of how much you can afford to spend on a home.

Prime interest rate

The prime interest rate is typically awarded to a U.S. bank’s best customers. It’s the best-available loan rate and is usually three points above the federal funds rate: the rate banks charge each other for overnight loans.

The principal of a loan is the amount of money owed on that loan. As you make monthly mortgage payments, your principal -- in theory -- goes down.

The amount of interest you pay on a monthly loan will affect how much of your monthly mortgage payment goes to paying down the principal. A high interest rate means you’ll pay less on the principal, meaning you’ll pay more on your loan over time.

Purchase agreement

A purchase agreement demonstrates a buyer’s intent to purchase a piece of property and a seller’s intent to sell that property. The document outlines the terms and conditions of a sale and holds each party legally accountable to meeting their agreement.

Purchase-money mortgage

A purchase-money mortgage , also known as owner or seller financing, is issued to the buyer by the seller of a home during the purchase transaction.

It is done to bypass a typical mortgage broker or lending channel and allows the buyer to assume the seller’s mortgage.

Quitclaim deed

A quitclaim deed is a document transferring ownership of property from one party to another. It transfers the title of the property -- but only transfers what the seller actually owns.

If two people own a home jointly, one person could only transfer their half of the property via quitclaim. This type of transaction is commonly used when property is being transferred between family members not using traditional real estate channels.

A rate lock allows borrowers to lock in an advantageous interest rate before a real estate transaction closes. A rate lock allows the borrower to lock in that interest rate for a specific period of time protecting them from market fluctuations.

Real estate agent

A real estate agent is licensed to negotiate and coordinate the buying and selling of real estate transactions. Most real estate agents must work for a realtor or broker with additional training and certification.

Real estate owned

Real estate owned (REO) refers to property owned by a bank, government agency, or other lender. Homes typically become real estate owned after an unsuccessful foreclosure auction or short sale.

Real Estate Settlement Procedures Act

The Real Estate Settlement Procedures Act (RESPA) requires lenders to provide disclosures to borrowers informing them of real estate transactions, settlement services, and relevant consumer protection laws.

Its goal is to regulate settlement costs, prohibit specific practices such as kickbacks, and limits the use of escrow accounts.

Refinancing replaces an existing loan with a new one. Debt is not eliminated when a borrower refinances. Instead, it typically offers better terms, including a lower interest rate, lower monthly mortgage payments, or a faster loan term.

Right of first refusal

If a third party buyer offers to buy or lease a property owner's asset, the right of first refusal ensures the property holder is allowed a chance to buy or lease the asset under the same terms offered by the third party before the property owner accepts the third-party offer.

Right of ingress or egress

The right of egress is a person’s legal right to exit a property. The right of ingress is the right to enter a property. It is generally used in rental or easement situations in which the tenant or person to which easement has been granted needs access to a shared driveway, a private road to the property, etc.

Right of survivorship

The right of survivorship is employed most often when there is joint ownership or tenancy of a property. It ensures that the surviving owner automatically receives the deceased owner’s share of the property becoming the sole owner of the property.

Sale-leaseback

A sale leaseback occurs when a buyer closes on a home and then leases back tenancy to the seller. This usually occurs when the seller needs more time to vacate the home, in which case, the buyer becomes a sort of landlord and receives payment from the seller for every day they remain in the home.

Second mortgage

A second mortgage is when a property owner borrows against the value of their home. They are also commonly referred to as HELOCs and draw on the market value of the home to provide the borrower with funds to use however they wish. They are granted in a lump sum or a line of credit that can be paid back using rate choices that help plan payments.

Secured loan

A secured loan is backed by the borrower's assets, including cars, a second home, or other large items that can be used as payment to a lender if the borrower is unable to pay back the loan.

Seller carry-back

A seller carry-back is financing in which the seller acts as a bank or financial institution financing some or all of the transaction. The buyer will sign a promissory note agreeing to pay a specific amount (like a mortgage) to the seller, and the seller transfers the title to the new owner.

If the buyer is unable to make their monthly payments at any time, the seller can legally foreclose and take back the property.

A mortgage servicer manages the daily administrative work around a loan, including processing loan payments, responding to borrower inquiries, and tracking principal and interest paid.

A short sale occurs when a homeowner sells their property for less than what’s owed on the mortgage. A short sale allows the lender to recoup some of the loan that's owed to them but must be approved by the lender before the seller moves forward.

A home’s title represents the rights to the property. Those rights are transferred from the seller to the buyer during a real estate transaction and give the buyer legal rights to the property upon closing.

Transfer of ownership

In real estate, transfer of ownership refers to transfer of a property’s deed and title from the seller to the buyer at closing.

Transfer tax

Transfer tax is a transaction fee charged upon the transfer of a property’s title. It is imposed by the state, county, and municipal authority where the transaction is taking place and is based on the property’s value and classification.

Typically, the seller is responsible for paying real estate transfer tax, unless otherwise agreed upon during the transaction.

Treasury index

The treasury index is published by the Federal Reserve Board and based on the average yield of Treasury securities. Financial institutions often use this index as the basis for mortgage notes.

Under contract

A home is “ under contract ” when a seller has accepted an offer from a buyer but the transaction has not yet closed.

VA mortgage

Service members, veterans, and eligible surviving spouses can receive home loan guarantees provided by private lenders. The Department of Veteran’s Affairs guarantees a portion of the loan, which leads to more favorable terms for the borrower.

Whether you’re a buyer, seller, or realtor, it’s important to stay up to date on current real estate trends and market fluctuations. Check out this roundup of top real estate blogs and top websites for selling a home .

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78 Real Estate Terms and Expressions You Should Know

Whether you're ready to buy your first home or just need an acronym refresher, keep this glossary handy.

You don't need a real estate license to find your dream home, but it does help to become familiar with real estate jargon you might encounter during the process. When searching for a home or applying for a mortgage, you may hear your real estate agent or lender use any of the terms or acronyms below.

Keep this guide handy — you'll be fluent in the language of home buying before you know it.

1. 2-1 Buydown  

A 2-1 buydown is a concession or incentive negotiated with a seller or builder that temporarily reduces a buyer’s mortgage interest rate by 2 percentage points the first year and 1 percentage point the second year of your mortgage.  In the third year, the interest rate goes back to the fixed rate obtained from the lender.

2. Adjustable-rate mortgage (ARM)

An adjustable-rate mortgage, or ARM, has an introductory interest rate that lasts a set period of time and adjusts every six months thereafter for the remaining loan term. After the set time period your interest rate will change and so will your monthly payment. Learn more about adjustable-rate mortgages .

3. Affordability

Affordability or home affordability refers to the amount of money you can comfortably afford to spend on a home. Experts say a home is considered affordable if the mortgage consumes no more than 30% of a household’s income. Home affordability assessments primarily take into account your income, down payment, and monthly debts. Try our affordability calculator to see how much house you might be able to afford.

4. American Society of Home Inspectors (ASHI)

A not-for-profit professional association that sets and promotes standards for property inspections. Look for this accreditation or something similar when shopping for a home inspector.

5. Amortization

Repayment of a mortgage over the loan term through regular monthly installments of principal and interest, based on an amortization schedule. If you have made your required monthly payments, at the end of the loan term (e.g., 15 or 30 year mortgage), you will own your home. Try our amortization calculator to learn more .

6. Back-end ratio 

One of two debt-to-income ratios that a lender analyzes to determine a borrower’s eligibility for a home loan. The ratio compares the borrower’s monthly debt payments to gross income.

7. Backup offer

A backup offer is one made on a home where the seller has already accepted an offer. The backup puts the buyer in line to buy the home if the accepted offer falls through.

8. Bumpable buyer

A buyer whose purchase agreement includes a contingency that allows the seller to continue to market the home to other prospective buyers. For instance, a buyer may agree to buy the home only if they can sell their own home first. That buyer can be bumped if a better offer comes along.

9. Buyers agency fee

The fee or commission paid to a buyer’s agent or brokerage for finding and managing a home purchase for a buyer. Typically represented as a percentage of the sales price, the fee is paid by the seller at closing.

10. Buy-rent breakeven horizon

A concrete point at which buying a home makes more financial sense than renting one. Read more about the Buy-Rent Breakeven Horizon .

11. Buyers market

Market conditions that exist when homes for sale outnumber buyers. Homes can sit on the market for a long time, and prices tend to drop.

12. Cash-value policy

A homeowners insurance policy that pays the replacement cost of a home, minus depreciation, should damage occur.

13. Closing costs

Fees associated with the purchase of a home that are due at the end of the sales transaction. Fees may include the appraisal, the home inspection, a title search, a pest inspection and more. Buyers should budget for an amount that is 2% to 5% of the home’s purchase price. Read more about closing costs .

14. Closing disclosure

This is a statement a borrower will receive from their lender at least three days before closing on a home. The line items should look similar to what a borrower sees on their loan estimate when first applying — there are limits to how much any fees can change in the time period between application and closing day, so borrowers should review their closing disclosure closely and ask their lender about any changes.

15. Comparative market analysis (CMA)

An in-depth analysis, prepared by a real estate agent, that determines the estimated value of a home based on recently sold homes of similar condition, size, features and age that are located in the same area.

Or comparable sales, are homes in a given area that have sold within the past several months that a real estate agent uses to determine a home’s value.

17. Contingencies

Conditions written into a home purchase contract that protect the buyer should issues arise with financing, the home inspection, or something out. Read about nine types of real estate contingencies for buyers .

18. Conventional loan 

A home loan not guaranteed by a government agency, such as the FHA or the VA. Read more about conventional loans .

19. Days on market (DOM) 

The number of days a property listing is considered active.

A deed is the legal document that establishes ownership of real property, and is also used to transfer the ownership of real property to another person or entity.

21. Debt-to-income ratio (DTI)

A ratio that compares a home buyer’s expenses to gross income. Try our debt-to-income calculator to learn more. 

22. Depository institutions

Banks, savings and loans, and credit unions. These institutions underwrite as well as set home loan pricing in-house.

23. Down payment 

The portion of a home’s purchase price that a buyer must pay upfront. A minimum requirement is often dictated by the loan type. Learn more about down payments .

24. Due diligence 

An in depth investigation of a property that helps ensure you know as much about a property as you can before buying it. Due diligence officially starts once an offer has been accepted, and typically involves a home inspection, review of property records to ensure improvements received the necessary permits, etc. within a period of time agreed to by the buyer and seller. Buyers can renegotiate their offer if they uncover problems, or they can cancel the offer without paying a penalty.

25. Earnest money

A security deposit made by the buyer to assure the seller of his or her intent to purchase.

A percentage of the home’s value owned by the homeowner.

27. Escalation clause

A clause or addendum to a real estate contract or offer that states a buyer is willing to raise his or her offer price to a predetermined amount if the seller receives a higher competing offer for the property. Read more about escalation clauses and making an offer on a home .

28. Escrow state

A state in which an escrow agent is responsible for closing.

29. Fair Housing Act

A federal law that makes discrimination based  on a person’s race, color, religion, sex (including gender identity and sexual orientation), national origin, disability, or familial status illegal within the housing context, including buying a home or getting a mortgage. Learn more about the Fair Housing Act .

30. Fannie Mae® 

A government-sponsored enterprise chartered in 1938 to help ensure a reliable and affordable supply of mortgage funds throughout the country.

31. Federal Housing Administration (FHA) 

A government agency created by the National Housing Act of 1934 that insures loans made by private lenders. The Federal Housing Administration is part of the U.S. Department of Housing and Urban Development. 

32. FHA 203(k) 

A rehabilitation loan backed by the federal government that permits home buyers to finance money into a mortgage to repair, improve or upgrade a home.

33. FHA loan

Loans from private lenders that are regulated and insured by the Federal Housing Administration (FHA). FHA loans are different from conventional loans because they can be approved for borrowers with lower credit scores and may allow for down payments as low as 3.5% of the total loan amount. Maximum loan amounts can vary by county. Read more about FHA loans .

34. FICO Score

A FICO score is a measure of creditworthiness that lenders use to determine whether they will lend you money to buy a home. The score, reported as a single number, is based on data compiled by the three major credit reporting bureaus (Experian, Equifax and TransUnion). Scores range from 300-850. 

35. Fixed-Rate Mortgage

A mortgage with principal and interest payments that remain the same throughout the life of the loan because the interest rate does not change.

36.  Forbearance

Forbearance is an agreement with a lender that allows a homeowner to catch up on payments if they fall behind on their mortgage. The agreement allows the borrower to catch up either by the lender reducing the amount owed or suspending loan payments for a certain period.

37. Foreclosure

A property repossessed by a bank when the owner fails to make mortgage payments. Learn more about foreclosure .

38. Freddie Mac®

A government agency chartered by Congress in 1970 to provide a constant source of mortgage funding for the nation’s housing markets.

39. Home inspection

A visual evaluation performed by a licensed home inspector to look for any potential defects or items of note related to the property, building(s), and the systems in a home. Inspection occurs when the home is under contract or in escrow.

40. Homeowners insurance

A policy that protects the structure of the home, its contents, injury to others and living expenses should damage occur. Learn more about homeowners insurance .

41. Housing ratio

One of two debt-to-income ratios that a lender analyzes to determine a borrower’s eligibility for a home loan. The ratio compares total housing cost (principal, homeowners insurance, taxes and private mortgage insurance) to gross income.

42. In escrow

A period of time (typically 30 days or more) after a buyer has made an offer on a home and a seller has accepted. During this time, the home is inspected and appraised, and the title searched for liens, etc.

43. Jumbo loan

 A jumbo loan is a mortgage that exceeds the conforming loan limits for a given area as set by two federally backed home mortgage companies. In 2023, a jumbo loan for most of the United State is one over the conforming limit of $726,000.  Areas with especially high home prices have higher limits. Learn more about jumbo loans .

A lien is any legal claim upon a property for a debt or a non-monetary interest in the property. A lien is a security interest that can give a creditor the right to take possession of a property secured by a loan, such as a mortgage, when the borrower defaults on the loan obligations. Most lenders will require title insurance to protect their interests should there be outstanding liens on the property securing their security interest.

45. Listing price

The price of a home, as set by the seller.

46. Loan estimate

A three-page document sent to an applicant three days after they apply for a home loan. The document includes loan terms, monthly payment and closing costs. A loan estimate can help borrowers shop and compare costs of loans with lenders. You are not obligated to accept the loan just because you received a loan estimate. Smart mortgage shoppers apply for at least two loans and use the loan estimates to determine which lender they want to use.

47. Loan-to-value ratio (LTV) 

The amount of the loan divided by the price of the house. Lenders reward lower LTV ratios.

48. Mortgage banker

One who originates, sells, and services mortgage loans and resells them to secondary mortgage lenders such as Fannie Mae or Freddie Mac.

49. Mortgage broker

A licensed professional who works on behalf of the buyer to secure financing through a bank or other lending institution.

50. Mortgage escrow account

An account required by a lender and funded by a buyer’s mortgage payment to pay the buyer’s homeowners insurance and property taxes. A portion of your monthly payment goes into the escrow account to cover taxes and insurance. If your mortgage doesn’t have an escrow account, you may pay the property-related expenses directly.

@zillow Escrow: the period in a sale where the buyer’s money is held by a third party in an escrow account. #zillow #homebuying #realestate #awkward #facepalm ♬ original sound - Zillow

51. Mortgage Insurance Premium

A mortgage insurance premium (MIP), is a monthly mortgage insurance premium paid by a borrower for a mortgage insurance policy with an FHA loan. Mortgage insurance protects the lender if the borrower defaults on the mortgage loan. Unlike private mortgage insurance (PMI), MIP is managed internally by the government and lasts for the life of the loan — meaning it won’t roll off when you reach a certain LTV ratio like it does when you have PMI. Read more about mortgage insurance .

52. Mortgage points

When you buy mortgage points, you pre-pay the interest rate by making an upfront payment to the lender at closing  in exchange for a lower interest rate. Pre-paying interest is also known as buying down your interest rate. The points or prepaid interest is usually paid during closing. Learn more about mortgage discount points .

53. Private Mortgage Insurance

Private Mortgage Insurance or PMI, is a monthly mortgage insurance premium paid by a borrower for a mortgage insurance policy. Mortgage insurance protects the lender if the borrower defaults on the mortgage loan. Mortgage insurance is usually required on a conventional mortgage loan and the down payment is less than 20 percent of the sale price. Read more about mortgage insurance .

54. Mortgage interest rate

The price of borrowing money. The base rate is set by the Federal Reserve and then customized per borrower, based on credit score, down payment, property type and points the buyer pays to lower the rate.

55. Multiple listing service (MLS) 

A database where real estate agents list properties for sale.

56. Origination fee

A fee, charged by a broker or lender, to underwrite and process a home loan application. An origination fee is not a single fee. It’s a set of lender-specific fees that are part of your costs when closing a mortgage loan. Read more about origination fees .

57. Pending

Pending means the seller has accepted an offer, a purchase contract has been signed, and contingencies between the buyer and seller have been addressed.

58. Piggyback loan

A combination of loans bundled to avoid private mortgage insurance. One loan covers 80% of the home’s value, another loan covers 10% to 15% of the home’s value, and the buyer contributes the remainder.

Prepaid interest owed at closing, with one point representing 1% of the loan. Paying points, which are tax deductible, will lower the monthly mortgage payment.

60. Pre-approval 

A thorough assessment of a borrower’s income, assets and other data to determine a loan amount they would qualify for. A real estate agent will request a pre-approval or pre-qualification letter before showing a buyer a home. Learn more about pre-approval .

61. Pre-qualification 

A basic assessment of income, assets and credit score to determine what, if any, loan programs a borrower might qualify for. A real estate agent will request a pre-approval or pre-qualification letter before showing a buyer a home. Read more about pre-qualification .

62. Prepayment penalty

A prepayment penalty is a fee some lenders may charge if you pay off some or all of your mortgage early. Not all mortgages carry a prepayment penalty . Be sure to read the fine print carefully.

63. Prime rate

Prime rate is the interest rate charged by a lender to customers who are the least likely to default on their loans. The most credit-worthy customers (mainly large corporations), receive the best or lowest rate that the lender would offer any of its customers. Each lending institution sets its own prime rate. Typically, most consumers’ mortgage  interest rate is going to be higher than the prime rate.

64. Principal, interest, property taxes and homeowners insurance (PITI)

The components of a monthly mortgage payment.

65. Private mortgage insurance (PMI)

A fee charged to borrowers who make a down payment that is less than 20% of the home’s value. The fee, 0.3% to 1.5% of the yearly loan amount, can be canceled in certain circumstances when the borrower reaches 20% equity. Read more about PMI .

66. Property tax exemption

A reduction in taxes based on specific criteria, such as installation of a renewable energy system or rehabilitation of a historic home.

67. Refinancing

The act of paying off one loan by obtaining another. Refinancing is generally done to secure better loan terms, such as a lower interest rate. Learn more about refinancing .

68. Sellers market

Market conditions that exist when buyers outnumber homes for sale. Bidding wars are common. Prices are often higher than average.

69. Short sale

The sale of a home by an owner who owes more on the home than it’s worth. The owner’s bank must approve a lower listing price before the home can be sold. Learn more about short sales . 

@zillow Short sale = the seller owes more than the home is worth. (Ironically, buying one can take a while) #zillow #homebuying #realestate #awkward #facepalm ♬ original sound - Zillow

70. Tax assessment or assessed value

The value assigned to a home by a local government to determine the amount of property taxes a homeowner owes.  The assessment, which is usually made once a year, differs from an appraisal, which estimates the value of a home, based on market conditions when it’s listed for sale. 

71. Tax lien

The government’s legal claim against property when the homeowner neglects or fails to pay a tax debt.

72. Title insurance

Insurance that protects the buyer and lender should an individual or entity step forward with a claim that was attached to the property before the seller transferred legal ownership of the property or “title” to the buyer.

73. Transfer taxes

Fees imposed by the state, county or municipality on transfer of title.

74. Under contract 

A period of time (typically 30 days or more) after a buyer has made an offer on a home and a seller has accepted. During this time, the home is inspected and appraised, and the title is searched for liens, etc.

75. Underwater or upside down

When a homeowner owes more on their mortgage than their home is worth. 

76. Underwriting 

A process a lender follows to assess a home loan applicant’s income, assets and credit, and the risk involved in offering the applicant a mortgage.

77. Walkthrough

A buyer’s final inspection of a home before closing.

A designation, assigned by local government, to a parcel of land that dictates how it can be used. Common designations include residential, commercial, industrial and agricultural.

Find out what else you can do to prepare for buying a home.

Grant Brissey

A local agent can help you stay competitive on a budget.

They’ll help you get an edge without stretching your finances.

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359 + Real Estate Terms & Flashcards (September 2024)

Free real estate definition flashcards, alphabetical real estate terms & definitions list, real estate terms that start with a, acceleration clause, active property, actual fraud, adjustable-rate mortgage (arm), adverse possession, affinity housing, agreement of sale, alienation clause, americans with disabilities act of 1990, amortization, antitrust laws, appraisal contingency, appreciation, appurtenance, appurtenant, appurtenant easement, arbitration, attorney-in-fact, real estate terms that start with b, balloon loan, bargain and sale deed, beneficiary, bilateral contract, bill of sale, blanket mortgage.

A blanket mortgage is a single loan that allows borrowers to buy multiple real estate properties under one mortgage. Instead of having multiple mortgages for multiple properties, this type of mortgage allows borrowers to buy multiple properties with a single mortgage.

Blind Offer

Blockbusting, breach of contract, bridge loan.

A bridge loan provides short-term financing to homeowners while moving from one house to another.

Buffer Zone

Building codes, bundle of rights, buyer’s home sale contingency, buyer’s agent, real estate terms that start with c, capital gain, capitalization, capitalization rate, caveat emptor, cetris peribus, chattel mortgage, civil rights act of 1866, closing cost, co-borrower, co-ownership, color of title, commercial property, commingling, commingled real estate funds, community property, comparables, comprehensive environmental response, compensation, and liability act of 1980 (cercla), condemnation, condominium, consideration, conspiracy to boycott, construction loan, constructive eviction, constructive fraud, contingent property, conventional loan, corporation, corporeal property, cost approach, counteroffer, creative financing, real estate terms that start with d, deed restrictions, defeasance clause, delinquent mortgage, delinquent taxes, depreciation, discount points, dividing territories, dominant estate, double net lease, down payment, dual agency, real estate terms that start with e, 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gross lease, gross national product (gnp), gross rent multiplier, growing equity mortgage, real estate terms that start with h, habendum clause, home equity line of credit (heloc), home inspection, homeowner insurance, housing and community development act, real estate terms that start with i, income approach, implied contract, implied grant, improvement, index lease, inspection contingency, interim financing, inverse condemnation, involuntary alienation, involuntary liens, real estate terms that start with j, joint tenancy, real estate terms that start with k, real estate terms that start with l, latent defect, lease expiration, lease option, lease termination, lease violation, leasehold estate, life estate, limited liability company (llc), limited partnership, lis pendens, listing agreement, littoral rights, loan commitment, loan origination fee, lot and block, real estate terms that start with m, market data approach, market value or market price, master plan, material defect, mechanic’s lien, metes-and-bounds, mezzanine financing, modified gross lease, mortgage assignment, mortgage broker, mortgage lien, mortgage servicing rights, mrs. murphy exemption, multiple listing service (mls), municipality, mutual agreement, real estate terms that start with n, negative fraud, net listing, net operating income, nonhomogeneity, notice of default, real estate terms that start with o, open-end mortgage, open listing, owner financing, ownership in severalty, real estate terms that start with p, package mortgage, participation loan, partnership, pending property, percentage lease, periodic tenancy, personal property, planned unit development, power of attorney, prepayment penalty clause, prescriptive easement, price fixing, principal payment, principle of conformity, principle of contribution, principle of highest and best use, principle of progression, principle of regression, principle of substitution, promissory note, property management, property manager, property tax, purchase agreement, purchase money mortgage, pur autre vie, real estate terms that start with q, quitclaim deed, real estate terms that start with r, real estate, real estate agent, real estate broker, real estate economics, real estate license exam, real estate license requirements, real estate lien, real estate pre licensing, real estate settlement procedures act, real property, receivership, recovery fund, refinancing, release clause, rent control, rent stabilization, restrictive covenants (ccr), reverse mortgage, riparian rights, real estate terms that start with s, safe drinking water act (sdwa), sales contract, sandwich lease, satisfaction of mortgage, secondary market, secured loan, seller’s agent, servient estate, shared appreciation mortgage, single-family home exemption, sole proprietorship, special warranty deed, special agent, straight note, subordination clause, subordinate loan, subsidized housing, superfund amendments and reauthorization act of 1986 (sara), real estate terms that start with t, tenancy in common, tenant rights for repairs, tenant turnover, tenants by the entirety, the clean water act (cwa), the fair housing act, the fair housing amendments act of 1988, the truth in lending act, tie in agreement, title contingency, title insurance, triple net lease, real estate terms that start with u, underwriting, underwriter, unenforceable contract, unilateral contract, universal agent, unsecured loan, real estate terms that start with v, valid contract, variable lease, variable interest rate, void contract, voidable contract, voluntary alienation, voluntary liens, real estate terms that start with w, warranty deed, water diversion, water rights, wrap-around loan, real estate terms that start with z, zoning ordinances, 8 thoughts on “359 + real estate terms & flashcards (september 2024)”.

Thank you Zak for making real estate easier to understand… its a long course! I am almost there..

Best vocabulary index I have seen. Thank you!!!

Thank you so much! I’m in the process of making 255 flash cards!

Thanks for all the vocabulary words.

why are the some words in blue.

They are blue because you can click them and they’ll take you to a full article covering the real estate vocabulary term!

Reading this one by one really help to understand each term better

What are the requirements to obtain a Commercial Loan Officer license in California? Commercial, not Residential? To which agency do I apply? Can I be a Commercial Loan Officer and a Commercial Real Estate Salesperson at the same time?

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11 Real Estate Terms That Every Buyer And Seller Should Know

U.S. News & World Report

September 12, 2024, 8:00 PM

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When someone enters the real estate market for the first time, whether as a buyer or seller , there might be a steep learning curve when it comes to learning and understanding relevant industry vocabulary. Although real estate made its way into cocktail conversation years ago, new buyers and sellers would be wise to familiarize themselves with more than just the basics since so many of these terms and phrases are connected to financially consequential decisions.

[ Related: The Most Common Questions Buyers Ask Real Estate Brokers ]

1. Real Property

Real property is a common technical term for “real estate” that is transferred from owner to owner by written deeds. For many of us, it could mean a house or a condominium , but the definition includes land, any infrastructure on that land, the air above it and riparian rights below. Real property can be owned by an individual, a group of people, a corporation or trust, and it includes tangible real property and intangible real property. Anything that can be removed from the land without damaging the property is not considered real property.

— Tangible real property — physical interest in land and the structures on it. This includes structures like buildings, whether residential or commercial.

— Intangible real property — legal interest in land.

2. Condominiums are Real Property

If someone owns a condominium , they own the four walls, the space within and an undivided interest in the common elements (hallways, equipment, ducts and air shafts, outdoor areas, etc.). Owners must comply with the rules set forth by the condo board as well as zoning regulations, often mostly pertaining to construction and renting. An owner can use it as a primary residence, a vacation home and/or an investment property. They can finance it or refinance it, co-own it with people who aren’t their spouses or own it in a corporate entity or trust.

3.But NYC Co-ops Are Not

If someone owns a co-operative apartment in New York City, where I am based, they don’t actually own real property, but shares of stock in a corporation that owns the building and land. Each apartment is allocated shares on the basis of unit size, floor number, etc. If a tenant shareholder wants to sell their shares (and the related unit), consent is required by the co-op’s board of directors, in the form of “board approval.”

A co-op owner likely has more rules pertaining to ownership than a condo or house owner, including but not limited to subletting restrictions, financing rules or limits, and guidelines around ownership (such as co-purchasing, gifting, buying/owning in a corporate entity). While the corporation owns real property, a unit owner in a co-op does not, and when they buy or sell the co-op apartment, they are selling their shares of stock, which might be classified differently in the eyes of the government or a lender.

HOA stands for homeowners’ association , and it is the governing body for a group of homes within a designated community. The HOA board consists of elected residents tasked with setting rules that improve and maintain the values of the homes in the community, as well as the living experience of the association members. The HOA collects monthly dues or fees, which pay for structural upkeep and salaried staff. Additionally, an HOA’s covenants, conditions and restrictions (CC&Rs) describe what owners can and can’t do with their homes. “These communities often have rules, maintenance standards and architectural review boards,” says Kathryn Kramer, a real estate agent with Howard Hanna Real Estate Services in Norfolk, Virginia. “It’s very important for a buyer to consider if the regulations and dues are in line with their expectations.” Depending on the size and location of an individual home within the designated community, the dues or fees might vary. This is common for gated communities, as well as condo complexes.

What Might This Mean in the Real World?

In a gated community, the HOA fees could go toward the upkeep of common areas and amenities, like a pool, fitness center, tennis courts or lounges, as well as the salaries of security guards and maintenance staff. In NYC high-rises, for example, the HOA fees, known in a co-op as “maintenance” and in a condo as “common charges,” would go toward the salaries of doormen and janitors, as well as the costs of certain pooled utilities like water and gas.

Since the CC&Rs lay out what owners can and can’t do with their homes, it pays to review these before purchasing. “I once had a client looking for a townhome with a hot tub on the roof,” said Michael Rachlis, a real estate agent at Compass’ Sunset Strip office in West Hollywood, CA. “There were many townhouses with the right space, but most of their CC&Rs firmly prohibited roof hot tubs because they were either not approved for the structure of the building or due to possible liability. By reviewing the CC&Rs ahead of time, we saved time by avoiding properties that would not allow roof spas.”

An HOA also sets rules about decorum and behavior for residents within common areas and will mediate disputes among neighbors if complaints are brought regarding noise, construction or damage.

5. Curb Appeal

When buyers are looking at houses, the first things they see from the street are the façade of the home and the front yard. This is known as curb appeal . Sellers and their agents should try to maximize curb appeal because this is a buyer’s first impression. If the house is newly painted and the landscaping is attractive, this sets the tone for a buyer’s visit before they even step inside. Conversely, if the lawn is wild, a dead tree sits in a cracked driveway and shutters are falling off broken windows, this home is lacking in curb appeal and many potential buyers might not even come.

If you are planning to sell your house, it might make sense to take photos and list it during the spring or early summer , when the light is bright, the lawn is green and lush, and your home looks its best from the sidewalk. This is when curb appeal is likely at its best. If the leaves are dead, the paint is cracked from dry air and the weather is likely to be cold and wet, this might not be the best time for a potential buyer to fall in love with what you’re selling. Savvy buyers might purposely go house hunting when the weather is cold and wet, thinking they’ll have less competition.

[ READ: Improve Your Curb Appeal: 6 Projects You Can Tackle in a Weekend ]

6. Due Diligence

Real estate is a big purchase. As with any big allocation of funds, it makes sense to do your homework . This includes not only evaluating all aspects of the property and understanding its position among the comps but also ordering inspections and exploring financing options. This is called due diligence . Buyers should conduct their own due diligence, as well as engage brokers, lawyers, lenders and/or inspectors so they understand all risks involved and feel comfortable proceeding with the purchase.

“Due diligence exists because, while a home might look great on a casual walkthrough, there could be hidden issues or deferred maintenance that need to be addressed,” says Rachlis. “A good real estate agent should help call attention to any issues that may inhibit a client from enjoying the house. This could be pointing out that the property is in a flight path next to the airport, for example, or that zoning restrictions on height might make it impossible to build a second story.”

Sometimes the due diligence process can turn up information that might save a client from buying real estate that could prove more costly than anticipated.

“I once represented a client who fell in love with a house, but after reviewing city records and obtaining a geological survey, it was likely that a retaining wall at the end of the property was beginning to fail,” Rachlis says. “Estimates predicted it would cost over $200,000 to reconstruct, and this risk-averse client did not have the budget. Even though they really liked the home, they knew they had to walk away from the deal due to valuable information obtained through due diligence.”

7. Concessions

In a negotiation, one party might add some concessions to make a deal more attractive to the other party. If maintaining a high contract price is a priority for the seller, throwing in concessions may encourage the buyer to offer a higher deal price. Concessions generally have to have some monetary value. In NYC new development, for example, developers have been known to pay a buyer’s closing costs or even offer a “decorating credit” at the closing table if the buyer agrees to a higher contract price. Another scenario might be if a seller needs the proceeds out of the old house quickly but the buyer isn’t ready to move in. The buyer might offer the seller a sale-leaseback, also known as a post-closing holdover, where the seller rents the home back from the buyer after they become the new owner.

If two parties are close to making a deal, but refusing to budge on the price, concessions might make the deal possible. “I’ve had deals where a seller offered to pay a buyer’s HOA fees for a certain period of time or even pay points to buy down a rate,” says Kramer. “Often these contract terms may be as important as the price of the home, so it is of utmost importance to ascertain the priorities of the other party to craft the strongest deal.”

A good real estate agent will know how best to use various concessions to help their clients and make the deal happen, since sometimes the price isn’t the only negotiable term of a deal.

[ Read: The Buyer and Seller Guide to a Real Estate Bidding War. ]

8. Home Inspection

As part of the due diligence process before buying a home, it is prudent to order a home inspection , wherein a hired specialist will examine all aspects of a structure, including its systems, foundation, plumbing, roof and more. The inspector’s report enables a buyer to better understand any issues, whether structural, systemic, related to pest infestation and the like, empowering them to make a wise decision about whether to proceed with the purchase. Given the financial magnitude of purchasing real estate, mitigating various risks with additional information can help a buyer make educated choices about proceeding.

If too many red flags emerge from an inspection, that beautiful home might not be financially wise, especially for buyers on a limited budget.

9. Down Payment

When purchasing a home, the down payment is a sum of money the buyer pays at closing as a percentage of the contract price. “It’s their contribution towards the purchase price of the property,” says Kramer. The down payment is a percentage of the purchase price, with the remainder being the amount of the mortgage. A larger down payment means the buyer will need to borrow less money from a lender, which may affect the interest rate, mortgage insurance and other terms.

If a home costs $1,000,000, you don’t have to come up with a million bucks now. Depending on how much money you can put down as your down payment, along with other factors like your credit rating, income and debts, a lender will work with you to find a mortgage product that makes sense. “It is crucial to work with a lender that understands the different loan programs,” Kramer says, “so that you get the best mortgage product available to you.”

10. Appraisal

An appraisal is a report conducted by a third party, presenting an opinion of a property’s value. When a buyer is financing (or refinancing) a purchase, the lender needs some assurance that the price is in line with market value in order to protect itself. An appraiser is a licensed professional and in their report, will describe the property, utilize data from present and recent comps, and report on the neighborhood in how it relates to value. An appraisal is required if a buyer is getting a mortgage.

“Not only does an appraisal report protect the bank, but it also protects the borrower from over-investing in a particular property,” says Kramer. The bank will likely make a loan based on the appraised value of the property, not on the contract price, so the buyer and seller hope the appraisal report will support the price they negotiated. “In a competitive market, guaranteeing the sales price against a low appraisal by bringing extra cash at closing is a powerful tool to increase the competitiveness of an offer,” Kramer says.

11. Appreciation

Most people hope the value of their acquired assets will increase. Some look to make a quick profit, but most property owners usually hope for an increase in value over time — commonly called appreciation . Real estate traditionally has provided owners with a highly stable asset with good appreciation and possible revenue over time. There have certainly been periodic market fluctuations depending on many factors like local or global economics and changing supply and demand or interest rates. Maintaining and enhancing value requires careful planning. Capital improvements to the property, like smart upgrades or renovation projects, as well as regular upkeep and maintenance, will contribute to a property’s value and appreciation. Conversely, a weak housing market, a neglected or worsening neighborhood, and a cheap or aging renovation will hurt a property’s appreciation or contribute to its depreciation .

A smart buyer should rely on expert advice by working closely with an experienced and knowledgeable real estate agent who can provide a continuing stream of comparative market data and have other professionals ready for support, such as attorneys, contractors and mortgage lenders.

Your Best Weapon

Information is power, especially when taking on risks. If a buyer or seller is ready to enter the real estate market, it makes sense to learn the industry lingo and surround yourself with professionals who can explain every aspect of the process. As always, a good real estate agent can be one of your best weapons to navigate any housing market.

More from U.S. News

What Buyers Can Learn From Home Stagers to Make Small Spaces Look Bigger

How Does Buying a House As-Is Work?

Florida’s Condo Crisis: Why Condo Sales are Plummeting

11 Real Estate Terms That Every Buyer And Seller Should Know originally appeared on usnews.com

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17 Essential Marketing Terms You Need to Know

September 13, 2024

In the real estate industry, mastering marketing terminology allows agents to implement sophisticated strategies and optimize their businesses. Here are the top marketing terms every real estate agent should know, as well as how they apply specifically to our industry.

Find It Fast

Automation in real estate marketing refers to the use of technology and software tools to streamline repetitive tasks and processes, allowing agents to focus on higher-impact activities. By leveraging automation, agents can enhance their marketing efficiency, scale their outreach efforts, and increase overall productivity.

Common uses of automation include scheduling social media posts , deploying email drip campaigns, and nurturing leads with pre-set workflows. It can also involve setting up automated alerts for new listings, using chatbots to engage website visitors, and automating customer relationship management tasks like follow-up communications.

Call to action (CTA)

A key part of modern marketing terminology, a call to action is any prompt that encourages users to take a specific action, such as scheduling a consultation, visiting your website, or contacting you for more information. These should be used across all your marketing platforms to increase conversion rates and reach your business goals.

Automated chatbots serve as a 24/7 customer service tool. They engage with website visitors, answering questions, providing property details, and scheduling viewings, all while capturing leads’ contact information for later follow-up.

Content marketing

Content marketing is the creation and distribution of valuable, relevant content to attract and engage a target audience. For real estate agents, content marketing might involve blog posts, videos, or market reports that establish their expertise and build trust with potential clients.

Conversion rate

This represents the percentage of users who take a desired action after engaging with your online presence. This desired action might be clicking a link, filling out a contact form, or scheduling a consultation. In real estate marketing, tracking conversion rates helps you assess how effectively your social media or online campaigns are turning leads into clients .

Email drip campaigns

Email drip campaigns are automated sequences of marketing emails sent to prospects over time. These campaigns help you nurture leads by providing valuable information at regular intervals, keeping your brand front and center in a potential client’s mind.

Nurture leads effortlessly with email templates

Our free e-book offers customizable resources and tips to keep your database engaged, move leads through the funnel, and close deals effectively.

Engagement rate

This measures the percentage of interactions (often likes, comments, and shares) that content receives compared to the number of overall followers or viewers. It’s a key indicator of how well an audience is responding to your marketing.

Geotargeting

This marketing term refers to the practice of delivering ads to consumers based on their geographic location. It allows real estate agents to ensure their marketing efforts are hyper-targeted at prospects within a defined area who are most likely to be interested in their services.

Hashtags are essential in today’s social media-driven world. They categorize content and make it more discoverable by users interested in specific topics. Using real estate-related hashtags like #LuxuryHomes or #DreamProperty is an effective way to boost your marketing efforts and improve visibility on platforms such as Instagram and Facebook.

IDX software

Internet data exchange enables real estate agents to syndicate property listings across multiple platforms. This technique is essential for those looking to boost property visibility and expand their audience reach. As a related piece of marketing terminology, multiple listing service syndication software is similarly crucial, ensuring that listings are seen on high-traffic platforms like Zillow and realtor.com.

Landing pages

A landing page is a single web page designed for a specific marketing campaign. It typically features a clear CTA and is used to capture leads or convert visitors into clients. Real estate agents can use landing pages for listing promotions and event registrations, among other purposes.

Landing pages generate leads

Our e-book guides you through seven types of landing pages that are engineered to bring in high-quality prospects.

Pay-per-click (PPC) advertising

PPC advertising is a highly targeted marketing strategy where agents bid on specific keywords so that, when users search for them, their ads appear prominently in the results. By mastering PPC ads , agents can drive more traffic to their listings and generate higher-quality leads based on the specific terms their target audience is searching for.

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In social media marketing , this is the total number of unique users who have been exposed to your content. Reach helps agents measure how many people their posts are potentially influencing.

Retargeting ads

Retargeting is an advanced marketing technique that displays ads to individuals who have previously interacted with your website or content, but haven’t yet converted. This targeted strategy helps agents stay top of mind with prospects, increasing the chances of turning a lead into a client.

Search engine optimization (SEO)

SEO is a foundational term in online marketing that involves optimizing your website and content for search engines. By improving your site’s ranking for relevant keywords, you can increase organic traffic and visibility. Real estate professionals who master SEO can expect to attract more leads with less reliance on paid advertising.

Social proof

This marketing term describes the influence that positive feedback and engagement from past clients have on potential buyers or sellers. It can take the form of testimonials , likes, comments, and shares.

User-generated content (UGC)

This term encompasses anything created by users (often clients or followers) about your brand, such as testimonials, reviews, or posts about their real estate experience. UGC that portrays your brand in a positive light is powerful for building trust and generating referrals .

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By mastering key terms and strategies, agents can elevate their marketing efforts and better connect with clients. If you’re ready to apply this marketing terminology to your business, consider partnering with the experts at Luxury Presence. We can help you implement these concepts through cutting-edge tools and strategies tailored to your unique needs, offering a significant advantage in building a powerful online presence.

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Learn how we can help take your real estate business to the next level. Schedule a time to speak with one of our branding experts today.

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More From Forbes

The advantages of in-person vs. hybrid or remote work in real estate.

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Different office configurations in three stories of an office building as seen through the windows ... [+] from the outside. (Photo by © Viviane Moos/CORBIS/Corbis via Getty Images)

With the onset of Covid, along with advancements in technology that have made it easier to connect from anywhere, the landscape of work has changed significantly during the last years. While previously real estate companies might have expected staff members to come to the office every weekday, today’s environment often accommodates hybrid and remote work too. Whether you’re considering how to get started in real estate or want to take on a different job, you may evaluate different arrangements regarding where you have to be each day.

During my 25-year career in real estate, I have found that the advantages of in-person work tend to outweigh the benefits of remote options. If you’re in the office every day of the week, or most days of the week, you will have the chance to build a long, successful career.

Consider these guidelines as you think about your real estate career and how you’ll work:

1. The Value of Client Relationships

The real estate industry is largely built on personal interactions, and I often say there’s no substitute for in-person meetings. These can help you develop relationships with clients and navigate complex negotiations. If you’re meeting regularly with a seller, for instance, it could be easier to manage expectations and keep everyone involved updated on activity related to the property. Showing properties to potential buyers gives you a chance to understand what they are looking for and any concerns they might have, which you can then address as you move into the negotiation process.

2. Collaboration with Team Members

If you’re in the office every day, you’ll have the chance to see co-workers and share information directly with them. You could hear insights related to market trends and learn about important details. This information could impact the deals you’re working on or help you spot new opportunities.

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You may also find that carrying out projects is easier if you’re regularly with other staff members in a work setting. Real estate transactions tend to involve multiple parties and having in-person meetings can help everyone stay informed. You’ll also be able to have spontaneous discussions and receive immediate feedback, which could help quickly resolve situations that come up.

3. Flexibility Considerations

Remote and hybrid work options may provide the chance for you to set some of your working hours. It could be appealing to organize your own schedule and have built-in flexibility. At the same time, you’ll need to find a space where you can focus. Staying productive while working at home could be challenging, especially if you have multiple distractions throughout the day. You might find that the office, with its more structured setting, enables you to get through tasks and be more efficient with your time.

4. Mentorship Opportunities

If you’re new to the industry, in-person work will give you the chance to observe senior-level team members. You’ll be able to see the way they manage their time and learn from them. As I mention in my book, “ The Insider’s Edge to Real Estate Investing ,” at my first job in real estate, I listened to how my mentors handled different situations and picked up incredible tips that I could apply to my own career. If you’re working from home, you could potentially miss out on these chances to learn.

5. Hands-On Property Management

If you’re involved with property management, being physically present at locations is often a requirement. You might need to inspect properties, schedule maintenance, and address any tenant issues as they come up. You’ll want to be able to respond quickly to matters and while phone calls or texts can help, you may find that the best way to find solutions is to be at the property in person.

For these reasons, when others ask me about taking a hybrid arrangement or an in-person position, I always encourage going to a workplace as much as possible. On my podcast, “ The Insider’s Edge to Real Estate Investing ,” Ian Ross of Somera Road discussed the value of being on the ground to find new markets. While remote and hybrid work models offer flexibility, the nature of the real estate business is largely based on face-to-face interactions. If you head to the office every day, or most days of the week, you’ll likely find that it’s easier to connect with clients, work with your team, and understand the current market conditions. You’ll be able to find ways to both address everyday matters and build your future career in real estate.

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Renal rate/realstate value - Rostov-on-Don Forum

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Hey Rostov on Don experts, does any one have any idea how much the monthly rent/ or real state value of 2 bed room apartment (75-100 m2) in a building with elevator on M. Gorkuy street? Would appreciate any info.

As I stated when you asked about the cost to purchase an apartment in Rostov. The price will be all over the place. Gorky street is a main street that cut's across one side of Rostov to the other. The central area is very old (some of the buildings are almost falling down). So this area would be much cheaper. If you let's say went far west (to newer buildings) it would cost much more. So the cost is anyones guess? And why only this street? You are limiting yourself. An apartment near down town, but on a side street would be the way to go, and maybe much cheaper? I would just go there, stay at the Rostov hotel and look around. And remember, you will need to barter on the price.

We did some checking on line, and a 3 room (2 bed room)apartment near the city center will set you back about $600.-$850. per month in U S dollars. If or when you go there, go to any real estate agency, and they can look into it for you. In general, most apartment rentals are handled by R agents. There is a place down town where everyone meets to sell or to rent there apt's and or homes. But it is impossable for me to tell you how to get there. If you hire someone to interpret for you, they should no where this place is? It is an outside area, where the bus's coming from the west side of town turn around,(U turn that is) to go back, or to head back toward the west end of town. This bus area is located just south and a bit west of the main McDonalds (that is in the bottom floor of a huge department store on Bolshoi sadova/saldova or big garden street). The huge down town church is just a little east of this area. Good luck. If you need anything, send me a private post as before.

This topic has been closed to new posts due to inactivity.

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Regents approve renaming of Institute of Behavioral Science, Leeds Real Estate Center, more

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The University of Colorado Board of Regents approved renaming the Institute of Behavioral Science the “Jessor Building" and the CU Real Estate Center the “Michael A. Klump Center for Real Estate.”

The board also heard preliminary fall enrollment estimates.

Board approves renaming: CU’s Institute of Behavioral Science Becomes ‘Jessor Building’

The Board of Regents was asked to approve renaming the Institute of Behavioral Science at CU Boulder as the “Jessor Building” in honor of Professor Emeritus Richard Jessor. Jessor, a World War II veteran and founder of the institute, served as its director for over 20 years and significantly contributed to its success, even donating $1.15 million of his salary to fund a new building. This naming honors his extraordinary service and legacy at CU Boulder as he approaches his 100th birthday.

Regents name CU Real Estate Center, now the ‘Michael A. Klump Center for Real Estate’

Alumnus and philanthropist Michael Klump has donated $15 million to CU Boulder to enhance real estate education and student wellness. The gift allocates $13 million to expand the Michael A. Klump Center for Real Estate at the Leeds School of Business, endowing faculty positions, scholarships and innovative programs. The remaining $2 million will support student mental health and wellness initiatives in the College of Arts and Sciences. Klump's investment highlights the transformative impact of philanthropy on education and student well-being.

Preliminary fall enrollment estimates

CU Boulder shared preliminary projections, which are subject to change, for fall 2024 census data with the regents. Total enrollment is projected to be 3.5% over fall 2023, or 1,305 students, due to increased retention. Data also projects a 1.5% reduction in first-year students. Final census data will be available next week.

Other business

• The board was scheduled to vote on changes to Regent Policy 1.D, which concerns guidelines on personal expression in university-controlled digital spaces, but deferred to consider this motion at a future meeting after more discussion.
• The board approved a utility infrastructure project in the North Boulder Creek (NBC) neighborhood, which will provide energy-efficient utilities for the under-construction student housing facility Residence One, as well as future housing in the area. The project, which is projected to last from November 2024 to April 2026, will provide medium-voltage power, hot water heating and chilled water to the NBC neighborhood. 
• On Friday, discussions focused on the transformative potential of AI across various fields, emphasizing the importance of preparing students for future jobs that don't yet exist and of preparing students to be able to “learn, unlearn and relearn.” The board also discussed the need for the university to develop clearer guidelines on AI use and education for students, given the potential opportunities and risks associated with AI.

The next regular board meeting will be held Nov. 7–8 on the University of Colorado Colorado Springs campus.

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