100+ Real Estate Terms You Need to Know29 Sep Rebecca Yazzie
Real estate can be very confusing to outsiders, with its own language of industry-specific terms and acronyms. From CMA to REALTOR® to zoning and everything in between, it can be easy to get lost in the jargon.
To help you navigate this new vocabulary, we’ve put together a list of terms buyers and sellers come across during a real estate transaction. While this is by no means an exhaustive list, it will help you learn the most commonly used terms in the real estate industry.
A real estate brokerage is a licensed real estate firm that assists clients in the buying and selling of property. Each brokerage is helmed by a managing broker and is required to have Errors and Omissions (E&O) insurance.
Real estate agents are licensed under their broker but they are not employees. Brokerages may also have special departments, such as a relocation or property management department, to further help clients with specific needs.
2. Buyer Representation Agreement
A buyer representation agreement is a contract signed between a prospective home buyer and a real estate brokerage for the right to represent them in a real estate transaction. It will outline the terms of the agreement, including the time frame and the services that the brokerage agrees to render the client during that time, which is typically 3 months by default.
3. Buyer’s Agent
A buyer’s agent is a licensed real estate agent who has signed a buyer's representation agreement with a prospective buyer. They will guide the buyer through the entire transaction, including finding potential properties, offering advice, negotiating on their behalf, and writing and submitting the offer. Simply put, a buyer’s agent is an advocate for the buyer.
A commission is a negotiable fee paid to both listing and buyer’s agents for services rendered during the sale of a property. It is typically 6% of the total cost of the property and split evenly between the agents, but commission splits and fees will vary from transaction to transaction and can be negotiated. Commission funds are disbursed by the title company at the time of closing.
5. Fair Housing Act
Signed in 1968 as part of the historic Civil Rights Act, the Federal Fair Housing Act prohibits discrimination in real estate transactions, including sales, rentals, and financing, base on race, religion, country of origin, sex, handicap or family status. Discrimination complaints filed under this act are investigated by the Office of Fair Housing and Equal Opportunity (FHEO).
The US Department of Housing and Agriculture (HUD) is a cabinet of the executive branch. Programs within HUD include Fair Lending, Housing Choice Voucher Program (Section 8), economic development programs and many others.
Short for instant buyer, an iBuyer is a company that will offer to buy a property at fair market value, accept a fee for facilitating the sale, and then resell the house for a profit.
8. Listing Agent
A listing agent is a licensed real estate agent who has signed a listing agreement with a seller and is representing them in the sale of their property. The listing agent will market the property, including adding it to the local multiple listing service (MLS), showing the home to potential buyers and holding open houses.
They will also help to weigh any offers received, negotiate on the seller’s behalf, write up the contract and assist with any and all paperwork associated with the closing.
9. Listing Agreement
A listing agreement is a contract signed between a property owner and a real estate brokerage for the right to represent them in the sale of their property. It will outline the duties expected of both brokerage and seller, a date of termination for the agreement, and will specify compensation for the brokerage and the real estate agent.
10. Management Agreement
A management agreement is a contract signed between a property owner and a property management company for the right to manage their rental property. The management agreement can include collection of rent and other fees, processing of rental applications, maintenance and repairs, and being a point of contact for renters.
11. Multiple Listing Service
A multiple listing service, or MLS, is a database of available properties in a specific geographic area. They are managed by the local board of REALTORS®. Brokerages and REALTORS® within a given region are members of their MLS and contribute to the database, with larger brokerages belonging to several different MLS in their coverage areas.
12. Property Management
A property management company handles all aspects of the rental process on behalf of a property owner through a management agreement. Property management companies will market available rental properties, vet all rental applications, process the rental contract, collect rent and other fees, perform maintenance and repairs as needed, and act as the primary contact for renters and prospective renters.
Fees for property management vary, but typically start around 5% of total rent revenue. Some real estate brokerages have property management divisions that operate in the same capacity.
13. Real Estate Agent
A real estate agent is a licensed real estate professional who assists in the buying and selling of real estate in exchange for a commission. Real estate licenses are issued on the state level and require yearly continuing education to keep the license in active status. Real estate agents within the state of Texas are licensed by the Texas Real Estate Commission.
14. Real Estate Broker
A broker is a licensed real estate agent who has further completed the education required for a state broker’s license. Think of it as a master’s degree vs a Bachelor’s degree. Brokers are also able to supervise real estate agents licensed under them, as within a brokerage, and are ultimately responsible for all actions taken by those agents, acting as an advisor and mediator as needed.
A REALTOR® is a licensed real estate agent who is also a member of the National Association of Realtors and is bound by their strict code of ethics. REALTORS® also belong to boards on the state and local level, affording them greater access to market data and the multiple listing service (MLS).
16. Relocation Department or Service
A relocation department or service is designed to aid people in relocating to a new area, including assisting in finding a home and acclimating to the new surroundings. This can be a department within a real estate brokerage or an independent service company.
Companies will contract with relocation services to help facilitate the moves of their transferring employees. Military service members who have received new orders can also take advantage of relocation services.
17. Title Company
Title companies are responsible for verifying that a seller has a right to sell the property and then provide title insurance. They also manage the escrow account for the closing. A settlement agent of the title company will facilitate the closing, including disbursement of funds, and transfer of the title from seller to buyer.
A property being sold “as is” will be sold in its current condition, with no repairs, or credits toward repairs, made by the seller before closing. Properties sold “as is” may be sold in the condition they are in, but sellers still have to provide a disclosure of known problems and buyers can still opt for a home inspection, so they know what they may be getting into.
19. Building Code
Building codes are regulations that outline the basic standards for all buildings, including structural, material, electrical, and plumbing regulations to ensure the structure is safe and healthy. All structures, including homes, are subject to the local building code.
20. Building Restrictions
Building restrictions are prohibitions within the building code. They typically focus on appearance (such as height or building materials), location, or size. Building restrictions may be enacted to maintain a specific look in an area or to prevent unsightly structures from being built.
21. Buyer’s Market
The term buyer’s market refers to a real estate market in which there are more available homes for sale than there are prospective buyers. High inventory and low demand means that buyers will have greater negotiating power and sellers will have to price aggressively to make their property attractive.
22. Commercial Property
Commercial property is simply a property that is used for business purposes. It can also be a previously designated residential property that is now in a zoned commercial area. Commercial property is subject to different laws and taxes and requires different financing to purchase.
23. Common Area
A common area is one that is designated for communal use in a multifamily or commercial property, such as an apartment or office building. Including but not limited to hallways, bathrooms, parking lots, patio areas, and pools, they are open for all tenants of the property to use.
24. Comparative Market Analysis
A comparative market analysis, or CMA, is a detailed analysis of a property’s current market value. A licensed real estate agent can prepare a CMA on any home by pulling information on very similar properties using factors such as location, square footage, number of bedrooms, amenities and upgrades, and overall condition.
They will compare the price each comparable sold for or is on the market for and will use that information, along with experience and expertise, to provide an accurate current market value. CMAs are used by sellers to accurately price their homes and are also useful for buyers to ensure they are not overpaying for a property.
A condominium often shortened to condo, is basically an owned apartment. It is a privately owned unit within a larger complex. Most condos, like apartments, enjoy the use of communal spaces, such as pools and picnic areas, and have similar maintenance and utilities. A monthly or yearly service fee is often charged, similar to an HOA fee.
26. Covenants, Conditions and Restrictions
Covenants, conditions and restrictions are the rules set in place by a homeowners association, neighborhood association, or condominium complex and all properties within their jurisdiction are subject to those rules.
The strictness and number of rules vary from association to association, but typically govern the appearance of the property, allowable additions (such as fencing) and lawn maintenance. Stricter associations may have rules governing what gutters you can put on your house or what dog breeds are prohibited. Violating the covenants, conditions, and restrictions can result in fines, revocations of community privileges, and even lawsuits.
27. Days on Market
Days on market refers to the number of days a property has been actively for sale on the real estate market. The National Association of Realtor's measures days on market starting when the property is listed for sale on the local MLS and ending on the date when there is a signed contract for the sale. Days on market is used by sellers to determine how their listing is faring on the market and by buyers to determine negotiating power.
Not to be confused with a title, a deed is actually the physical piece of paper that conveys the title transfer from seller to buyer. The deed will outline the name of the seller, here called the grantor, and the buyer, or grantee, as well as a legal description of the property. In order for a title transfer to be complete, both parties will need to sign the deed.
29. Deed Restriction
A deed restriction is a rule written into the deed of a property that restricts how that property can be used in some way. Some common deed restrictions include prohibiting boats or RVs parked at the property, limiting or prohibiting free standing storage buildings, and prohibiting the keeping of livestock or farm animals. Deed restrictions can be established by builders, HOAs and neighborhood associations and are typically aimed at protecting the property values.
An easement is a right that gives its owner the right to use land that is owned by another person, usually for the purposes of access. Easements are awarded for property access to roads, water features such as public beaches, and utilities. Many utility companies possess easements that allow them to build and maintain utility poles, city sewer pipes and similar structures on privately owned land for the public good.
An encroachment is something that is built or placed on or over the property line, thus encroaching on the neighbor’s property. An encroachment can be minor, like an overgrown shrub, or it can be major, like the corner of the garage built over the property line.
Encroachments can cause legal issues with the sale of a home, so it’s always important to know exactly where the property line is before building or planting.
Foreclosure occurs when a mortgage lender repossesses a property after the property owner fails to make payments on their mortgage loan. Banks and other lending institutions will foreclose on a property and sell it to recover what is still owed.
33. Ground Lease
A ground lease is a commercial lease agreement whereby a tenant will pay rent on a piece of land but owns any buildings or developments they erect on that property. Most ground leases also require tenants to pay the property taxes and pay for maintenance of the land. Ground leases are always long term arrangements, usually at least 20 years.
34. Homeowner’s Association
A homeowner’s association, or HOA, is an organization that writes and enforces the covenants, conditions and restrictions of a community, be it a subdivision, condominium building, or neighborhood.
Membership in the HOA is usually mandatory and members are required to pay monthly or yearly dues. The management of an HOA is usually done by community members in elected positions, but some are professionally managed by outside companies.
A lease is a rental agreement between a property owner and a renter. The lease will designate the duration of the rental agreement, the rights and obligations of both parties, and the agreed-upon monthly payment of the rental fee.
A listing is a property that, through the signing of a listing agreement, is being marketed and sold by a real estate brokerage on behalf of the owner. The brokerage will handle all marketing, negotiations and paperwork for the seller and will be paid a commission upon sale of the property.
37. Littoral Rights
Littoral rights guarantee a property owner whose property abuts a static body of water, such as a pond, ocean or lake, the right to use the shore. These rights typically grant that they own everything on the shoreline up to the high median watermark.
In real estate, the term lot refers to a parcel of land, sometimes also called a tract or land lot, that is owned or for sale. Lot listings are being sold for the value of the land, rather than anything that might be on it. Additionally, a lot can also refer to the land that a property sits on, as in the description “3 bedroom home on 2+ acre lot”.
39. Market Value
Whatever a property will currently sell for is its market value. Sometimes referred to as “current market value” or “fair market value”, it will fluctuate with the real estate market. Real estate agents will perform a comparative market analysis (CMA) on a new listing to determine its market value and set the sale price.
40. Mineral Rights
Mineral rights concern the ownership of any resources existing under the surface of a property, like minerals, precious metals, or oil. They are separate from the rest of the property ownership and can be sold or retained by the property owner. Only the person who owns the mineral rights owns the minerals, regardless of who owns the property.
41. Party Wall
Though it sounds exciting and fun, a party wall is just a shared wall between two separately owned or rented properties. Apartments, condos, townhouses and garden homes will usually share at least one party wall with neighbors.
Not to be confused with a lot, a plat refers to the scale drawn map of a plot of land, or several plots of land, along with streets, easements, and similar features. A plat is drawn for the purposes of a legal description and to show where the property lines are. It is only concerned with the land boundaries and not with any improvements built upon the land.
43. Probate Sale
When a property owner dies without leaving a will, their property can be sold in a probate sale by the court to liquidate the asset. Probate sales are typically priced below market value to sell quickly, but can be tricky to purchase as there are a number of legal hurdles to jump when buying a home in probate.
44. Real-Estate Owned (REO)
A real estate owned, or REO, property is one owned by a mortgage lender after it has been foreclosed on and failed to sell at a foreclosure auction. Once a property becomes designated as REO, it will be put on the market and usually sold as-is and priced to sell quickly.