First time buyers face a learning curve that can feel overwhelming if the right level of support and education is not available. It's not enough to merely educate one's self on buying strategies, mortgage application, and closing process. Buyers must also navigate through a sea of unfamiliar legalese, home building lingo and real estate specific jargon.
The glossary below is by no means complete and is no substitute for the careful guidance of an experienced real estate agent, but it can serve as a good primer for consumers getting their feet wet in real estate for the first time.
Agency - The relationship of trust that exists between buyers or sellers and their agents. The agency is formed via a written contract.
Amortization - The process of paying the principal and the interest on a mortgage through regularly scheduled payments.
Appraised Value - A licensed appraiser's opinion of the current market value of a property.
Assessed Value - A tax assessor's determination of the value of a home in order to calculate a tax base.
Capital improvement - Any improvement that extends the life or increases the value of a piece of property.
Comparable sales - Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as "comps."
Contingency - A provision of an agreement that keeps the agreement from being fully legally binding until a certain condition is met. One example is a buyer's contractual right to obtain a professional home inspection before purchasing the home.
Dry Rot - Decay of seasoned wood caused by fungus.
Earnest Money Deposit - A deposit made by the potential home buyer as evidence of good faith that he or she is serious about buying the house.
Easement - A right or interest in the use of the land of another which entitles the holder to some use, privilege or benefit, such as to place power lines, pipe lines or roads.
Egress - The exit point from a property.
Escrow - An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the earnest money deposit is put into escrow until delivered to the seller when the transaction is closed.
Equity - A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.
Fixtures - Those parts of a property affixed to structures or land, usually in such a manner that they cannot be independently moved without damage to themselves or the property housing supporting or pertinent to them. Fixtures are usually included in a sale and commonly include but are not limited to items such as carpets and awnings.
Full Disclosure - In real estate, revealing all the known facts which may affect the decision of a buyer or tenant. A broker must disclose identified defects in the property for sale or lease.
Green building - Also known as sustainable building or environmental building, this definition varies depending on the agency or group. Generally it means to construct a building to the highest environmental standards by minimizing the use of energy, water and materials. A green building, for example, might have skylights, recycled building materials and solar panels.
Ingress - The entry point to a property.
Lien - A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien.
MLS (Multiple Listing Service) - An MLS is an organization that collects, compiles and distributes information about homes listed for sale by its members, who are real estate brokers. MLS's are local or regional.
Private mortgage insurance (PMI) - Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require PMI when the amount borrowed exceeds 80% of the purchase price or home's value.
Plat - A plan, map or chart of a tract or town site dividing a parcel of land into lots.
Subdivision - An area of land laid out and separated into lots, blocks, and building sites, and in which public facilities such as streets, alleys, parks, and easements for public utilities are also planned.
Sweat equity - used to describe the contribution made to a project by people who contribute their time and effort.
Title - A legal document evidencing a person's right to or ownership of a property.
Title company - A company that specializes in examining and insuring titles to real estate.