Real Estate Glossary

Appraisal An unbiased professional opinion of a home’s value.  The appraisal is paid by the buyer.

Appraisal Waiver – An appraisal waiver allows qualified home buyers to skip the in-person appraisal process when buying a home. Instead, lenders use data generated by an automated underwriting system to determine the value of the home based on the information it has collected from other recent home sales in the buyers’ area. Appraisal waiver offers are issued through Desktop Underwriter® (DU®) using Fannie Mae’s database of more than 50 million appraisal reports in combination with proprietary analytics from Collateral Underwriter® (CU®) to determine the minimum level of property valuation required for loans delivered to Fannie Mae. You might waive an appraisal if the determined higher or lower value does not have an influence on your ability to purchase the home and obtain the loan.

Approved with Conditions (AWC) – Approved with conditions is just a formal way of saying you need to answer some questions or provide additional documentation for your loan to be submitted for final approval. For example, you might need to explain a recent withdrawal from your bank account or provide a copy of your homeowners insurance.

AS-IS – Seller is unwilling to perform most if not all repairs. It could also mean that it is priced “as is.”

Backup Offer Contract stating a buyer will purchase a home from a seller with agreed-upon terms if the primary contract is terminated.

Blind offer – Buyer makes an offer on a property they haven’t seen.

Clear to Close (CTC) – “Clear to close” simply means that you’ve met the requirements and conditions to close on your mortgage. At this stage, your lender has fully inspected your documents and verified that you meet the expectations of the type and amount of mortgage you’re requesting.

Closing The home sale is considered final, which typically includes all parties’ signatures on all required documents, all monies conveyed, and when a lender is involved, with full lender’s approval.

Closing costs / Cash to close – An assortment of fees, including fees charged by: a lender, the title company, attorneys, insurance companies, taxing authorities, homeowner’s associations, real estate agents, and other closing settlement related companies.

Conditional Approval Conditional loan approval means that your mortgage underwriter is mostly satisfied with your mortgage application. They are willing to approve your mortgage so long as you can meet their pending conditions.

Covenants, conditions & restrictions (CC&Rs) Rules and regulations placed on real property by a homeowner’s association (HOA). A neighborhood association, a developer, or a builder that sets forth any requirements and limitations of what a homeowner is allowed to do with the property. It may also include monthly and/or annual fees or special assessments.

Conventional sale – The property is owned outright (has no mortgage remaining) or the owner owes less on their mortgage than what the market indicates the owner could sell their property for.

Days on market (DOM) The number of days from the date on which the property is listed for sale on the local real estate brokers’ multiple listing service (MLS) to the date when the seller has signed a contract for the sale of the property with the buyer.

Debt-to-income ratio (DTI) – A number used by mortgage lenders which is determined by the total of your debt expenses, plus your monthly housing payment, divided by your gross monthly income, and multiplied by 100.

Due Diligence (DD) – A due diligence period of time might be available in the purchase agreement, which is a time frame provided to a buyer to fully examine a property, often by hiring experts to inspect the property, perform tests, etc., so that a buyer may decide on how to proceed. Due diligence allows a buyer to fully understand what they are buying. This is non-refundable.

Earnest money deposit (EMD) – Referred to a “good faith deposit”, is the initial funds that a buyer is asked to put down once a seller accepts the buyer’s offer. It shows that the buyer is serious about buying.

Escrow holder – The agent and depositary (impartial third-party, an attorney) who collects the money, written instruments, documents, personal property, or other things of value to be held until the happening of specified events or the performance of described conditions, usually set forth in mutual, written instructions from the parties.

Equity – This is the investment a homeowner has in their home. It’s important to build equity as homeowners can leverage this financial asset to obtain loans to help finance items such as home repairs, or to pay off higher interest debt.

FHA loans – An FHA insured loan is a US Federal Housing Administration mortgage insurance backed mortgage loan that is provided by an FHA-approved lender. FHA mortgage insurance protects lenders against losses.

FHA 203k rehab loan – This is a “fixer-upper” loan, which combines the mortgage loan with a loan to help pay for repairs or updates, such as structural repairs, or energy-related updates. It is not intended to lend based off luxury upgrades such as adding a swimming pool or tennis courts.

Fixed rate mortgage – Your interest rate stays the same for the duration of the loan. They are often available as 10, 15, 20 & 30-year loans.

Hard money loan – A way to borrow without using traditional lenders.

Home Inspection – An inspection happens when buyers pay a licensed professional inspector to visit the home and prepare a report on its condition and any needed repairs. The inspection must occur during the due diligence period and paid by the buyer.

Homeowner’s association (HOA) A private association that manages a planned community or condominium. When you purchase a property that is managed by an HOA, you agree to abide by the HOA’s rules and pay its monthly or annually HOA dues.

Home sale contingency – A home sale contingency is for a buyer to indicate to a seller that part of their condition to purchase the seller’s property relies on the buyer’s ability to finalize a close on their current property.

Inspection contingency – Also known as a “due diligence contingency,” the inspection contingency is a clause sometimes offered in a purchase agreement that grants buyers a predetermined amount of time during escrow to perform any necessary inspections.

Land lease – Traditionally, when you purchase a home, you own the home and the land the property is built on. There are some circumstances that involve a land lease, which means you would own the home while paying rent to the landowner for the land.

Loan contingency – A loan contingency is a clause or addendum (also known as a mortgage contingency) in an offer contract that allows a buyer to back out of a deal and keep their deposit if they are unable to secure a mortgage with specified terms during a fixed period of time.

Loan Officer – Loan officers evaluate, authorize, or recommend approval of loan applications for people and businesses. Most loan officers are employed by commercial banks, credit unions, mortgage companies, and related financial institutions. Mortgage loan officers must be licensed.

Loan to value (LTV) – The loan-to-value ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. In Real estate, the term is commonly used by banks and building societies to represent the ratio of the first mortgage line as a percentage of the total appraised value of real property.

Mineral Oil Gas (MOG) – Mineral and Oil and Gas Rights Mandatory Disclosure Statement requires all sellers of a new or existing homes in certain states to disclose whether the mineral, oil and gas rights for the property are owned by someone other than the seller.

Mortgage Broker – Mortgage brokers are financial professionals who work with several lenders to offer a wide range of loan programs to consumers. These brokers match borrowers with specific lenders and loan programs that best meet their needs. Mortgage Brokers must be licensed and are regulated by the federal government.

Mortgage Insurance (MI) – Mortgage insurance is an insurance policy which compensates lenders or investors in mortgage-backed securities for losses due to the default of a mortgage loan.

Mortgage pre-approval letter – Getting a mortgage pre-approval letter is important because it gives home buyers an idea of what they can afford. A mortgage pre-approval letter is issued by the lender and identifies the terms, loan type and loan amount the buyer qualifies for after checking the buyer’s debt-to-income ratios along with cash on hand and credit history. Many sellers or their agents require a mortgage letter with any home offer that isn’t all-cash, since it acts as proof the buyer has been qualified to get financing.

Multiple listing service (or MLS) – An MLS is a database that allows real estate agent and broker members to access and add information about properties for sale in an area.

Natural hazards disclosure (NHD) report – A report required by most states that discloses if a property is located in an area that has a higher risk of natural hazards. The report is typically paid for by the seller and given to the buyer during escrow. The following natural hazard zones are covered in a NHD report:

  • Special flood hazard area
  • Area of potential flooding
  • Very high fire hazard severity zone
  • Wildland area that may contain substantial forest fire risk and hazards
  • Earthquake fault zone
  • Seismic hazard zone

Offer to purchase (OTP) or a counter offer – An OTP is an agreement that contains the terms and conditions for the purchase and sale of a property. Both parties need to come to an agreement about all sorts of issues before the document is signed. Buyers make a formal offer on the home they want to purchase. The offer can be the full list price, or what you and your agent deems a fair market value. The buyer’s agent puts the offer in writing, asks you to sign it, and then submits it to the seller’s agent. The seller might immediately accept it, in which case it becomes the parties’ purchase contract, or may make what’s known as a counter offer.

Pest Inspection – A pest inspector can definitively determine if there are unwanted pests, how big the infestation is, and how long it’s been there.

Pre-approval – Getting pre-approved requires home buyers to fill out an application that allows a lender or Mortgage Broker to determine their financial situation, including their debt-to-income ratio, ability to repay and credit-worthiness. Once this is in hand, the lender or Mortgage Broker can give the buyer a letter stating the exact loan amount they have been pre-approved.

Preliminary report – A preliminary report reveals any issues with a title that need to be dealt with by the seller in order to deliver a clear title. It gives details such as ownership history, liens, and easements. The title company gathers this report by searching existing property records at the county recorder’s office.

Pre-qualification – A pre-qualification is a lender or Mortgage Broker estimate of the amount a home buyer can expect to be approved for during the loan process. Getting pre-qualified is a quick assessment by a lender or Mortgage Broker of the buyer’s financial situation based solely off of what a buyer states, and not based with any proof or verifications.

Principal Interest (PI) – The principal balance of a mortgage loan is the amount of money owed to the lender. Principal is the outstanding balance of the loan. Interest is the amount, expressed in an annual percentage, that is charged for financing a loan. These two components of PITI is the portion of your monthly mortgage payment that goes toward paying off the money you borrowed to buy your home.

Proof of funds – When you make an offer, sellers will require you to submit proof of funds. If you’re buying a house with a mortgage, it shows them that you have the cash available for your down payment and closing costs. If you’re paying all cash, your proof of funds shows you have the money. The following documents qualify as proof of funds:

  • Original or online bank statements with bank letterhead
  • Copy of a money market account balance with bank’s logo or letterhead
  • Certified financial statements, such as an income or cash flow statement that’s been signed off on by an accountant
  • An open equity line of credit

Planned Unit Development (PUD) – PUDs are communities of homes, which can include single-family homes, condos, commercial property like retail stores or all of these property types.

Purchase and sale agreement (PSA) – A purchase and sale agreement is commonly referred to a written contract between the buyer and seller, which outlines the terms of the parties to sell and purchase real property. When a home is “under contract” it usually signifies that the Buyer and Seller have formalized their commitment to sell and purchase the real property.

Real-estate owned (REO) – Real-estate owned is a designation given to properties which are owned by a lender due to an unsuccessful foreclosure sale at auction. REO properties can sometimes present an opportunity for a buyer to be purchased for below market value as most banks would prefer to reinvest the proceeds, rather than waste time marketing the property for an extended period.

REALTOR® – An actively licensed real estate agent and REALTOR® are often used interchangeably, although not every real estate agent is a REALTOR®. A REALTOR® is a member of the National Association of REALTORS® (NAR). A REALTOR® promises to uphold the Code of Ethics of the association and to hold each other accountable for when serving the public, customers, clients and each other, with a high standard of practice and care.

Rent-back – Rent-back, or leaseback, refers to an arrangement whereby the buyer, who is now the new homeowner, agrees to allow the seller, the now-tenant, to stay in the house beyond the close of escrow. The terms are negotiated prior to the situation occurring and will often involve a lease deposit, a daily rental rate, and a length of time allowable.

Residential Property Disclosures (RPD) – The Residential Property Disclosure Act, requires the seller of residential real estate (one to four dwelling units) to complete a form known as the Residential Property and Owners’ Association Disclosure Statement—disclosing conditions and defects with the property.

Right of Survivorship – When joint tenants have right of survivorship, it means that the property shares of one co-tenant are transferred directly to the surviving co-tenant (or co-tenants) upon their death. While ownership of the property is shared equally in life, the living owners gain total ownership of any deceased co-owners’ shares.

Seller concession – Sellers may offer concessions to incentivize buyers to purchase the home or sweeten the deal.

Seller disclosure – A seller’s disclosure is a disclosure by the seller of information about the property, or which could affect a buyer’s decision to purchase the property, all of which to the best of the seller’s knowledge. A seller must also indicate items which are not specific to the property itself but related to a person’s enjoyment of the property, such as pest problems, property line disputes, knowledge of major construction projects in the area, military base related noises or activities, association related assessments or legal issues, unusual odors caused by a nearby factory, or even recent deaths on the property as permitted by law.

Subject to inspection – Subject to inspection, or “submit offers subject to inspection”, means that the seller is not allowing the property to be viewed without an accepted offer. Some common reasons for this are privacy concerns of the occupants or uncooperative tenants.

Tenancy in common (TIC) – Tenancy in common describes a type of joint ownership of a property, whether a single-family property or a commercial building. The tenants in common all own the property, but in different ratios.

Termite Inspection – A Termite Inspection is a visual inspection of the readily accessible areas of a home for evidence of termite activity and or termite workings/damage. The inspector will visually inspect the interior and exterior of the home or building including any accessible roof cavities or roof void, and sub-floor areas.

Title search – A title search examines public records for the history of the home, including sales, purchases, and tax and other types of liens.

Trust sale – A trust sale means that the home is being sold by a trustee of a living trust – and not a private party.

Underwriter (UW) – An underwriter is a member of a financial organization. They work for mortgage, insurance, loan, or investment companies. They assess, evaluate, and assume the risk of another party for a fee.

USDA loan – A USDA Home Loan from the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, is a mortgage loan offered to rural property owners by the United States Department of Agriculture.

VA loan – A VA loan is a loan guaranteed by the government (Department of Veteran Affairs) and available to the military, active and retired, and even for some eligible spouses, at low-to-no-down payment scenarios with competitive rates and fees.