Real Estate Terms Glossary

A legal relationship in which a licensee (agent) acts on behalf of a principal (buyer or seller) in a real estate transaction.

A situation where a single real estate agent or brokerage represents both the buyer and the seller in the same transaction.

The highest legal duty an agent owes to a principal — requiring the agent to act in the principal's best interest above all others.

A contract between a property owner and a real estate broker that authorizes the broker to market and sell the property.

A real estate licensee who represents the buyer's interests in a transaction, owing fiduciary duties to the buyer.

A real estate licensee who represents the seller's interests, markets the property, and owes fiduciary duties to the seller.

A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.

A condition in a purchase contract that must be satisfied before the sale can proceed to closing.

A legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.

A contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.

A contractual right giving a party the opportunity to match any offer received before the owner can accept it from a third party.

A sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.

The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.

A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.

The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.

A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.

Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.

Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.

A lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

A written promise to repay a loan under specified terms — the borrower's personal financial obligation in a real estate transaction.

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.

A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.

The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.

Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.

A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.

A tax-deferred exchange allowing investors to sell one investment property and reinvest proceeds in a like-kind property while deferring capital gains taxes.

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

A non-possessory right to use another person's land for a specific purpose.

Any claim, lien, charge, or liability attached to real property that affects its value or limits its use.

A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.

Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.

A condensed history of a property's title, summarizing all recorded documents and encumbrances affecting it from the earliest record to the present.

The sequential record of all transfers of ownership for a piece of property from the original patent holder to the present owner.

The highest and most complete form of property ownership — absolute ownership with the right to use, sell, or pass the property to heirs.

Co-ownership where two or more people hold equal, undivided interests with the right of survivorship — when one owner dies, their share passes to the surviving owners.

Co-ownership where two or more people hold undivided interests that need not be equal and pass to each owner's heirs — no right of survivorship.

In community property states, most property acquired during marriage is owned equally by both spouses, regardless of who paid for it.

A freehold interest in real property that lasts only for the duration of a specified person's life.

A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.

Fees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.

The division of ongoing property expenses (taxes, HOA dues, rents) between buyer and seller at closing based on their respective days of ownership.

A tax imposed by state or local governments when real property ownership is transferred, typically based on the sale price.

Local government regulations that control land use by dividing areas into zones specifying permitted uses, building sizes, and densities.

Official permission to use land in a way that does not conform to the applicable zoning ordinance, granted by a zoning board when strict enforcement would cause undue hardship.

The power of government to take private property for public use, with the requirement to pay the owner just compensation.

A doctrine by which a person can gain legal title to another's land by openly, continuously, and adversely occupying it for a statutory period.

Federal law prohibiting discrimination in the sale, rental, or financing of housing based on race, color, national origin, religion, sex, disability, and familial status.

An illegal practice where a real estate agent directs buyers toward or away from certain neighborhoods based on the buyer's race, religion, national origin, or other protected characteristics.

An illegal practice of inducing homeowners to sell by claiming that the entry of minority groups will lower property values.

An illegal practice where lenders or insurers deny services or charge higher rates in certain neighborhoods based on the racial or ethnic composition of those areas.