Real Estate Glossary

21 terms

Appraisal

An opinion of property value, often used in a lender’s review. It is different from a condition inspection.

A lender’s appraisal may differ from the agreed purchase price.

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Cash flow

For the calculator, net operating income less entered debt service. This limited model omits some costs and does not predict performance.

Hypothetical $1,850 NOI minus $1,400 debt service equals $450 before omitted costs.

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Closing costs

Transaction and loan charges separate from a down payment. Which charges apply depends on the loan and transaction.

A title service fee can be a closing expense.

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Comparative market analysis

An agent’s analysis of relevant properties to support a pricing discussion; it is not a formal appraisal or guaranteed valuation.

Ask why a comparison home is relevant to yours.

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Contingency

A contract condition with specific terms, deadlines, and procedures. Ask what protections and obligations apply before acting.

An investigation condition may address how a buyer reviews the property.

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Down payment

The part of the purchase price contributed without mortgage financing. Closing costs are separate.

Hypothetically, a $500,000 price minus a $450,000 loan leaves a $50,000 down payment.

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Earnest money

A purchase deposit handled according to the agreement. It is not automatically refundable or automatically the seller’s money.

Ask escrow when a deposit is due and how release instructions work.

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Equity

Property value minus debt secured against it, before selling expenses and other adjustments. It can increase or decrease.

A hypothetical $500,000 value minus $400,000 secured debt leaves $100,000 equity.

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Escrow

A third party holding transaction funds and documents under instructions. A mortgage escrow account instead pays certain recurring bills.

A purchase deposit may be held by the transaction escrow holder.

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Fixed-rate mortgage

A mortgage whose interest rate generally remains fixed for the loan term. Total payments can still change with taxes or insurance.

A fixed rate does not freeze an insurance premium.

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HOA

A homeowners association with responsibilities, charges, and rules set by its governing documents. Review what owners pay and maintain separately.

Ask whether roof maintenance is an owner or association responsibility.

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Home inspection

An evaluation of accessible property condition within an agreed scope. It may recommend further specialist review and cannot guarantee future condition.

A report might recommend a roofer evaluate a visible concern.

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Interest rate

The borrowing charge expressed as a percentage rate. APR includes certain other borrowing costs and is not identical to the interest rate.

Compare the rate and fees on written lender disclosures.

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Listing agreement

An agreement defining a broker’s services and the seller’s commitments. Review duration, compensation, termination, and other terms.

Ask which marketing services are included before signing.

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Mortgage

A loan secured by real property, with repayment obligations defined by the documents.

The lender evaluates both the borrower and the property.

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Net operating income

In the educational calculator, effective rent less listed operating expenses, before debt service, income tax, depreciation, and capital expenditures.

Hypothetical $2,850 effective rent minus $1,000 expenses equals $1,850 NOI.

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Pre-approval

A preliminary lending assessment subject to assumptions or conditions. Lenders use this label differently; it is not a guaranteed loan.

Ask which documents were verified and what conditions remain.

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Principal

The borrowed amount remaining to be repaid. It is separate from the charge for interest.

Part of a payment may reduce principal and part may pay interest.

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Property taxes

Taxes associated with property ownership. Amounts and timing depend on the property and jurisdiction; verify with the relevant assessor or tax office.

Do not assume a prior owner’s bill predicts your future bill.

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Title insurance

Coverage for specified title-related risks under a policy’s terms and exclusions. Lender and owner policies serve different insured parties.

Ask what a proposed owner policy covers and excludes.

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Underwriting

A lender’s review of borrower and property information against lending requirements. Further documents or conditions may be requested.

A lender may ask for an explanation of a financial document.

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Further reading: CFPB loan terms (opens in a new tab) · California DRE homebuying information (opens in a new tab)