Residential Real Estate Terminology

When buying, selling, or investing in residential real estate, understanding key terms can help you navigate the process smoothly. Below is a list of common terms used in residential real estate:

1. Appraisal

An evaluation of a property's market value by a licensed appraiser, typically required by lenders before approving a mortgage.

2. Assessed Value

The value assigned to a property by a local government for tax purposes, which may be different from its market value.

3. Closing Costs

The fees and expenses incurred at the end of a real estate transaction. These may include loan origination fees, title insurance, attorney fees, and property taxes.

4. Down Payment

The initial payment made by the buyer when purchasing a home. It is usually a percentage of the purchase price, commonly ranging from 3% to 20%.

5. Equity

The portion of the home that the owner actually owns, calculated as:
Equity = Property Value - Mortgage Balance

6. Fixed-Rate Mortgage

A mortgage where the interest rate remains constant throughout the loan term, ensuring predictable monthly payments.

7. Adjustable-Rate Mortgage (ARM)

A mortgage with an interest rate that adjusts periodically based on market conditions, often starting with a lower rate that may increase over time.

8. Homeowners Association (HOA)

An organization that manages a residential community, enforcing rules and maintaining common areas. Members usually pay monthly or annual fees.

9. Multiple Listing Service (MLS)

A database used by real estate agents to list and find homes for sale. It provides detailed property information and market data.

10. Pre-Approval

A process where a lender evaluates a buyer’s financial health and creditworthiness to determine how much they can borrow before house hunting.

11. Title and Title Insurance

• Title: Legal ownership of a property.
• Title Insurance: Protection against potential disputes or claims against the property.

12. Escrow

A neutral third-party account where funds and documents are held until all conditions of the sale are met.

13. Deed

A legal document transferring property ownership from the seller to the buyer.

14. Contingency

A condition in a real estate contract that must be met before the transaction can proceed, such as a home inspection or loan approval.

15. Closing Disclosure (CD)

A document provided to buyers before closing, outlining final loan terms, closing costs, and mortgage payments.

16. Amortization

The process of gradually paying off a mortgage through scheduled payments that include both principal and interest.

17. Short Sale

A situation where a homeowner sells a property for less than the outstanding mortgage amount, typically with lender approval, to avoid foreclosure.

18. Foreclosure

A legal process where a lender takes possession of a property due to missed mortgage payments.

19. Earnest Money Deposit (EMD)

A deposit made by the buyer to show serious intent to purchase a home. This amount is usually applied toward the down payment or closing costs.

20. Zoning

Local government regulations that dictate how land and properties can be used, such as residential, commercial, or mixed-use zoning.

These terms are essential for anyone involved in residential real estate, whether buying, selling, or investing.