Real Estate Glossary

February 21, 2024

Explore our NC real estate glossary for key terms, helping you navigate home buying and selling with confidence.

Acceleration Clause

  • A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.

Adverse Possession

  • The process of acquiring title to another's land by openly occupying it for a statutory period of time, usually 20 years.

Adjustable-Rate Mortgage (ARM)

  • A type of home loan where the interest rate charged on the loan fluctuates over time based on market conditions, as opposed to remaining fixed for the entire term like with a traditional fixed-rate mortgage.

Alienation Clause

  • Allows lender to call due a loan if property is transferred without approval.

Amortization

  • The process of paying off a mortgage loan over time through regular payments.

Annual Percentage Rate (APR)

  • The total cost of a mortgage loan including interest, fees, and other charges expressed as a yearly percentage.

Appraisal

  • An estimate of value of property resulting from analysis of facts about the property.

Arm's Length

  • A deal in which the buyer and seller act independently, without one party influencing the other, ensuring the transaction reflects fair market value.

As-Is Condition

  • The current physical condition of a property with no guarantees or warranties.

As-Is Sale

  • The buyer purchases the property in its current condition without repairs by the seller.

Assessed Value

  • The valuation placed on property by a public tax assessor for purposes of taxation.

Assignment

  • The transfer of a mortgage from one person to another.

Assumption of Mortgage

  • The buyer takes over responsibility for the seller's existing mortgage loan.

Amenity

  • A feature that enhances the value or enjoyment of a property, like a pool or gym.

Attorney Review Period

  • A negotiated period allowing the buyer and seller to have attorneys review the purchase contract.

Balloon Payment

  • A large extra payment that may be charged at the end of a mortgage loan or lease.

Bearing Wall

  • A wall that supports the weight of the structure such as roof rafters.

Broker Price Opinion (BPO)

  • A written estimate of the probable selling price or leasing price of a particular property.

Building Codes

  • Regulations that set minimum standards for construction, plumbing, electrical, etc.

Buyer Agency Agreement

  • A written contract between a buyer and a real estate brokerage authorizing the brokerage and its agents to represent the buyer in finding and purchasing property.

Capital Gains Tax

  • A tax on the profit realized when a capital asset is sold.

Capitalization Rate (Cap Rate)

  • The rate of return on a real estate investment property based on the expected income and the property's market value.

Caveat Emptor

  • Latin for "Buyer Beware". Meaning buyers are responsible for inspection and verification prior to purchase, as courts do not hold sellers liable for discoverable issues.

Certificate of Occupancy

  • A document from the local government indicating a property meets building codes and zoning laws.

Change Order

  • A document that alters the original specifications of a construction contract.

Cloud on Title

  • A defect impacting the legal ownership of real estate.

Closing Costs

  • Fees paid at real estate closing including lender fees, title fees, attorney fees, recording fees, etc.

Closing Disclosure

  • A document that provides details about the final terms and actual costs of a mortgage loan and real estate transaction.

Commercial Property

  • Property zoned or intended for use by businesses such as office buildings, retail stores, restaurants, etc.

Commission

  • Payment to a real estate broker for services rendered, usually a percentage of the selling price of the property. **Commission fee is to not be confused with Real Estate Commission**

Comparables (Comp)

  • Properties similar to a subject property that serve as a basis for valuing the subject property.

Comparative Market Analysis (CMA)

  • A survey of properties currently on the market similar to the subject property used to help determine a listing price.

Conforming Loan

  • A mortgage loan that conforms to guidelines set by Fannie Mae and Freddie Mac.

Contingency

  • A condition in a contract that must be met for the contract to be binding.

Contour Map

  • A map showing elevation changes across a property using contour lines.

Conventional Loan

  • A mortgage loan not insured by a government agency.

Construction to Perm

  • A construction loan that converts to permanent financing such as a conventional mortgage upon completion of the building project on a property. Also known as "Contract to Perm".

Cooperative (Co-op)

  • A form of ownership in which residents own shares in a corporation that owns a building.

Cost Segregation

  • A tax strategy that involves separating certain building costs into shorter recovery periods for depreciation purposes to maximize tax savings for commercial real estate owners.

Deed

  • A legal document conveying title to a property.

Deed in Escrow

  • A deed held in trust by a third party until the conditions of a contract are fulfilled.

Deed in Lieu of Foreclosure

  • A deed transferred from a borrower to the lender to avoid foreclosure proceedings.

Deed Restrictions

  • Limitations placed on the property's use outlined in the deed.

Down Payment

  • The portion of a home's purchase price paid upfront by the buyer.

Due Diligence

  • The buyer's opportunity to thoroughly investigate the property and all associated documents within a specified period to ensure they are making a well-informed purchase.

Due Diligence Fee

  • A negotiated, non-refundable payment made by the buyer to the seller for the right to conduct a thorough investigation of the property during the due diligence period.

Due Diligence Period

  • A block of time purchased by the buyer to give the buyer an opportunity to investigate the property, obtain financing, or terminate the contract.

Dual Agency

  • When one agent or brokerage represents both the buyer and the seller in the same real estate transaction.

Earnest Money

  • A deposit made by the buyer to show their good faith and commitment to purchase the property.

Earnest Money Deposit

  • Down payment made by a purchaser of real estate as evidence of good faith.

Easement

  • A right of way giving persons other than the owner access to or over a property.

Elevation Certificate

  • Documents a building's elevation in relation to sea level and flood zones.

Eminent Domain

  • The power of a governmental entity to take private property for public use through condemnation, while paying the owner fair compensation, as determined by a court of law.

Encroachments

  • When an improvement from one property extends onto another property.

Equity

  • The difference between a property's fair market value and the outstanding mortgage balance.

Equity Build-up

  • The process of increasing equity by making mortgage payments and as the property appreciates.

Escrow

  • The deposit of funds or documents with a third party to be delivered upon the fulfillment of specified conditions.

Escrow Account

  • A special account where monthly insurance and tax payments are held until they are paid out each year.

Exclusive Right-to-Sell Listing Agreement

  • A listing agreement that authorizes a broker to represent a seller as their sole agent and collect a commission no matter who procures the buyer.

Fannie Mae

  • A government-sponsored enterprise that purchases mortgage loans from lenders to facilitate liquidity in the mortgage market.

Fixture Filing

  • A UCC financing statement covering personal property affixed to real estate.

Fixtures

  • Items permanently attached to the property that convey with the sale.

Fixed-Rate Mortgage

  • A mortgage with an interest rate that remains the same over the life of the loan.

Footing

  • The enlarged base of a foundation that distributes weight across the soil.

For Sale By Owner (FSBO)

  • A property sold directly by the owner without a real estate agent.

Forced Air System

  • A HVAC system that uses ductwork and vents to distribute heated or cooled air.

Foreclosure

  • A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.

Freddie Mac

  • A government-sponsored enterprise that purchases mortgage loans from lenders to facilitate liquidity in the mortgage market.

General Warranty Deed

  • Deed where the grantor guarantees they hold clear title without encumbrances.

Grade Beam

  • A foundation wall that transfers the weight of a structure to piers or footings.

Graywater System

  • A system for reusing wastewater from sinks, showers and washing machines.

Hazard Insurance

  • Insurance that compensates for physical property damage from fire, storms, or other hazards.

Home Equity Line of Credit (HELOC)

  • A type of variable-rate loan that uses the equity built up in your home as collateral and allows you to borrow funds as needed up to a predetermined line of credit amount.

Home Inspection

  • An examination of the physical structure and systems of a home to identify any potential issues.

Home Warranty

  • A service contract that covers repairs and replacements for a home's systems and appliances.

Homeowners Association (HOA) Fee

  • A recurring fee payable to an HOA to cover common area maintenance and amenities of a neighborhood.

Housing and Urban Development (HUD)

  • A U.S. government agency that oversees federal housing programs and enforces fair housing laws.

Hybrid ARM

  • An adjustable-rate mortgage that has fixed payments for a set period before adjusting annually.

Inclusions

  • Items not permanently affixed that are intended to convey with the sale.

Ingress/Egress

  • The right to enter and leave a property.

Interest Rate

  • The percentage charged on a loan's principal balance.

Judgment Lien

  • A lien imposed on a property by a court due to a legal judgment.

Kick-out Clause

  • Allows the seller to continue marketing the home while under contract and accept another offer.

Lease Purchase Option

  • Allows a tenant to purchase the rental property according to the terms in the lease.

Lien

  • A legal claim against a property for payment of some debt or obligation.

Lis Pendens

  • A recorded document giving notice of a pending legal action related to real estate.

Listing Agreement

  • A contract between a property owner and a broker giving the broker authorization to represent the owner in the sale of their property.

Load-bearing Wall

  • A weight-bearing wall that supports floors, ceilings and roof framing.

Loan Estimate

  • A disclosure providing details of estimated mortgage loan costs.

Lot Line Adjustment

  • Moving a property boundary line with consent of adjacent owners.

Market Value

  • The estimated price a property would sell for on the open market.

Marketable Title

  • Ownership that is free of liens, clouds, and other defects.

Material Fact

  • Any fact that could significantly influence a reasonable person's decision to buy, sell, or lease a property.

Mechanic's Lien

  • A lien to secure payment for improvements or repairs provided for the property.

Mineral Rights

  • Specifies who retains rights to subsurface minerals such as oil and gas.

Mobile Home

  • A prefabricated housing unit that is built on a chassis and can be towed to a site, where it can be connected to utilities and occupied as a semi-permanent or permanent residence.

Modular Home

  • A prefabricated house that is constructed using pre-made sections or modules at a manufacturing plant, which are then transported to the building site and assembled and finished on a permanent foundation.

Mortgage

  • The transfer of an interest in property to secure the performance of an obligation.

Mortgage Broker

  • A person or company that arranges financing for a buyer.

Multiple Listing Service (MLS)

  • A database of properties listed for sale that is accessible to real estate agents and brokers.

Non-Recourse Loan

  • The borrower has no personal liability for the loan debt.

Nonconforming Use

  • A property use that was allowed but does not comply with current zoning.

Offer to Purchase

  • A written proposal by a buyer to purchase real estate on specified terms and conditions.

Origination Fee

  • A fee charged by a lender to process a new mortgage loan application.

Owner Financing

  • The seller provides financing instead of a traditional mortgage lender.

Party Wall

  • A common wall shared between two adjoining building structures or units that is jointly owned by both parties.

Perc Test

  • Checks the absorption of the soil to determine if a septic system is feasible.

Points

  • Fees paid to a lender to lower the interest rate of a mortgage.

Pre-Approval Letter

  • A letter indicating a lender's willingness to lend to a buyer at a certain amount.

Pre-Qualification Letter

  • A letter estimating the amount a lender may be willing to lend based on a buyer's income and debts.

Principal

  • The amount borrowed for a loan, not including interest.

Private Mortgage Insurance (PMI)

  • Insurance protecting a lender if the borrower defaults on a conventional loan.

Property Disclosure Statement

  • A form completed by the seller providing information about the property's condition, features, and history.

Property Tax

  • Taxes charged by local government on real estate ownership.

Purchase Agreement

  • A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Quitclaim Deed

  • A deed operating as a release containing no warranties of title.

Rate Buy Down

  • A financing technique that temporarily reduces a mortgage's interest rate for an initial period through subsidy points, allowing for a lower monthly payment in early years of ownership.

Real Estate Agent

  • A licensed professional who represents buyers or sellers in real estate transactions.

Real Estate Owned (REO)

  • Property owned by a lender after an unsuccessful sale at a foreclosure auction.

Real Estate Settlement Procedures Act (RESPA)

  • A federal law requiring lenders to provide home buyers with information about known or estimated settlement costs.

Remaining Balance

  • The amount left owing on a mortgage loan at any given time.

Rent-to-Own

  • A lease agreement where a portion of rent payments go toward purchasing the property.

Retaining Wall

  • A structure that holds back soil and prevents erosion on sloped ground.

Reverse Mortgage

  • A type of home loan for homeowners aged 62 and older that allows them to convert a portion of the equity in their home into cash or a line of credit without having to make monthly payments on the loan.

Septic System Inspection

  • An inspection to determine if an existing septic system is functioning properly.

Seller Concession

  • A seller's contribution to certain closing costs on behalf of the buyer. Also known as "Seller Credit".

Seller's Disclosure

  • A form detailing a property's characteristics, defects, improvements and history.

Septic System Inspection

  • An inspection to determine if an existing septic system is functioning properly.

Shear Wall

  • Reinforced walls designed to counter horizontal forces from winds or earthquakes.

Short Sale

  • The sale of a home for less than the balance owed on the mortgage.

Site Plan

  • A detailed architectural drawing of a property showing boundaries, structures, etc.

Special Assessments

  • An additional tax imposed on a property to pay for improvements that benefit it.

Special Warranty Deed

  • The grantor warrants title only against defects arising during their ownership.

Subject to Financing

  • Contingency allowing buyer termination if they cannot secure financing.

Subject to Survey

  • Contingency allowing buyer to cancel based on an unsatisfactory survey inspection.

Tax Parcel Number

  • The property's unique identification number for tax assessment purposes.

Tenant at Sufferance

  • A tenant that continues occupying a property after their lease expires.

Tenant Estoppel Certificate

  • A document signed by a tenant verifying lease details.

Term

  • The length of a mortgage loan or lease agreement.

Time is of the Essence

  • A contract clause emphasizing punctual deadlines for performance.

Title Insurance

  • Insurance to protect the buyer and lender against losses arising from disputes over the ownership of a property.

Title Search

  • Research of public records to determine any defects that may affect title.

Truth-in-Lending Act (TILA)

  • A federal law requiring lenders to fully disclose loan terms and costs.

Underwater Mortgage

  • A mortgage loan with a higher principal balance than the current market value of the home.

VA Loan

  • A mortgage loan guaranteed by the U.S. Department of Veterans Affairs.

Walk-Through

  • An inspection of a property by the buyer prior to closing.

Warranty Deed

  • A deed conveying title with a guarantee the grantor has clear title.

Zoning

  • Local government regulation of the use of property.

1031 Exchange

  • A tax strategy that allows real estate investors to defer capital gains taxes when selling investment or business use real estate by reinvesting the proceeds into similar "like-kind" property within strict time limits outlined by the IRS.

1033 Exchange

  • A tax strategy that allows taxpayers to defer capital gains taxes on insurance proceeds received due to the involuntary conversion of property through eminent domain by reinvesting in similar replacement property within a set time period.

Tim M. Clarke

About the author

17 years as a Realtor in the Research Triangle, Tim seeks to transform the Raleigh-Durham real estate scene through a progressive, people-centered approach prioritizing trust & transparency.

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