Real Estate Terms You Should Know

Felicia Oliver
Brendan Rigney

By 

Felicia Oliver

 & 

Brendan Rigney

June 24th, 2022
Updated June 24th, 2022

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Real estate is full of technical terms you probably won't encounter until you're buying or selling a home. Read through our list to find definitions of some of the common terms that you'll discover on your real estate journey.

A | B | C | D | E | F | H | I | L | M | N | O | P | Q | R | S | T | U

A

Adjustable-rate mortgage

An adjustable-rate mortgage (ARM) is a mortgage with an interest rate that goes up or down based on market conditions. There's usually a cap on how high the interest rate can go.

While a fixed-rate mortgage never changes its interest rate, one upside to an ARM is that its initial rate is typically lower than a fixed-rate one.

Appraisal

A home appraisal is a professional estimate of your home's value, usually based on a physical evaluation and the recent sales price of comparable homes in the same neighborhood. Most mortgage lenders require an appraisal to decide on a reasonable amount for your loan.

As-is

A property for sale "as is" means it's being sold in its existing condition, even if its systems aren't in working order. Either the seller won't make any repairs or changes to the home, or the buyer won't ask for repairs or credits.

Assessed value

Assessed value is the dollar value placed on a home by the local municipality, which then decides how much a homeowner owes in property taxes. Tax assessors make these valuations every year. In most states, the assessed value is a set percentage of the property’s fair market value.

Assessment

A property assessment is made by a government assessor from the relevant county or municipality to determine the value of a home and, as a result, the annual property taxes owed by the homeowner.

The assessed value is calculated by multiplying the home's fair market value by the local assessment rate, which can be any percentage less than 100% and is determined by each municipality.

B

Backup offer

Home buyers can make a backup offer on a home already under contract with another buyer. A backup offer puts you first in line for consideration by the seller if the current offer falls through. Buyers who submit a backup offer can still search for other properties while they wait.

Bill of sale

A bill of sale records the transfer of a property from a seller to a buyer. The seller typically signs this document at closing.

The bill of sale typically includes the name and address of the buyer and seller, their signatures, the purchase date, a brief description of the property sold, a list of all the personal property the seller is transferring to the buyer in the sale, and the amount paid.

Breach of contract

A breach of contract is a violation of any term or condition included in your real estate contract.

This can apply to sellers or buyers who decide to back out of their home sale, or if the seller fails to make a repair stipulated in the sale contract.

Broker

A real estate broker is an agent who holds an upgraded professional license requiring additional experience and education. Brokers can still represent buyers and sellers in real estate transactions. But unlike agents, they're also licensed to start their own brokerage firms and employ other real estate agents.

Broker price opinion

A broker price opinion (BPO) is a home valuation report provided by a licensed real estate professional. It determines your home's estimated market value based mainly on its condition and the recent sale prices of similar homes located nearby.

Buyer’s agent

A buyer's agent represents the buyer in the home-buying process. A buyer's agent can help you find properties, make offers, negotiate with sellers and protect your interests to ensure you get a fair deal.

C

Cash buyer

A cash buyer is an individual or a company that purchases a home for cash assets that they have on hand. If you can afford it, paying in cash can give you a strong negotiating position — and possibly even a much faster closing.

Cash-out refinance

A cash-out refinance is when you take out a mortgage for a greater amount than what you owe on your existing mortgage based upon the increased value of your property. You can pocket the difference that is paid in cash.

If you have high-interest debt — like credit cards or auto loans — you might consider paying it off using a cash-out refinance.

Closing

Closing happens when a buyer and seller meet to finalize a home sale: the buyer makes a down payment, and both parties sign documents and pay closing costs. The buyer and seller agree on a closing date that allows the buyer to apply and be approved for a loan and get a property appraisal.

Closing costs

Closing costs are fees that home buyers and sellers pay to complete a real estate transaction — in addition to the sales price of the home and the mortgage down payment.

Sellers typically pay 1–3% of the final sale price in closing costs, while buyers generally owe around 3–5%.

Lenders are legally required to disclose your estimated closing costs when they provide your loan estimate at least three days before your closing date.

Commission

Commission is the money a real estate agent earns at the end of a transaction for their services, usually paid by the seller. The going rate for realtor commissions is about 6% of the final purchase price, which covers both the buyer’s and seller’s agents, but you can always negotiate a lower rate.

Comparable market analysis (CMA)

A comparable market analysis (CMA, or comp) is an estimate of a home's value based on recent sale prices of similar nearby properties. The CMA considers square footage, features, number of bedrooms and bathrooms, age, condition, and any upgrades and renovations that have been completed. An experienced realtor can get you the most accurate numbers for free.

Contingencies

Contingencies are deal-breakers written into a purchase agreement. If every condition isn't met, either party can terminate the sale without a penalty. Contingencies can protect you against issues with home inspections, appraisals, financing, selling another home, and more.

Contingent offer

A contingent offer status means an offer has been made on a house, but an issue — the contingency — needs to be resolved before the deal closes. Once all the contingencies are met, the listing status changes to "pending."

Counter offer

When a buyer makes an offer on a house, the seller can accept it or make a counter offer.It's typically for an amount between the buyer’s original offer and the asking price.

D

Debt-to-income ratio (DTI)

Your debt-to-income ratio (DTI) is the percentage of your gross monthly earnings that goes toward monthly debt payments — e.g., credit cards, student loans, car loans, mortgages. Mortgage lenders set DTI limits (typically 36–43%) to prevent you from taking on too much debt and defaulting on your loan.

Department of Housing and Urban Development (HUD)

The Department of Housing and Urban Development (HUD) is a U.S. government agency that insures mortgage loans made by private lenders to homebuyers. HUD offers several programs through its Federal Housing Administration (FHA) to make homeownership possible for low-income and first-time home buyers.

Disclosure

A seller's disclosure tells a potential buyer about any issues that may affect a home's value or the health of its new occupants. Failure to disclose defects or problems could lead to withdrawn offers, legal issues with potential buyers, and a damaged reputation for the agent working with that seller.

Discount broker

A discount broker is a real estate company or agent that offers built-in commission savings for home sellers. Instead of charging the traditional 2.5–3% listing fee, discount brokers charge a flat fee or rates as low as 1% of a home's purchase price.

Dual agency

Dual agency means one agent represents both the buyer and the seller in a real estate transaction. Though this can provide some speed and convenience, it also presents a central conflict of interest.

Dual agency is illegal in some states. If you do work with a dual agent, you'll need to be your own advocate and negotiator, which can be challenging if you're new to the process of buying or selling a home.

E

Earnest money

Earnest money is the deposit made by the buyer once a home is under contract, usually 1–2% of the sales offer. Buyers can use that money toward the eventual down payment, and sellers have a little security should the deal fall through.

Easement

An easement grants someone the legal right to use another person’s real estate for a specific purpose while leaving the title in the owner's name. Easements are sometimes necessary on properties that have a shared driveway or when one owner can’t access their property without using another owner’s property.

Your real estate agent can usually find out if a property has any easements.

Equity

Equity refers to how much of your home you actually own — how much of the original mortgage balance you’ve already paid off. If you have a $200,000 home, and you still owe $150,000 on it, you have $50,000 in equity.

Escrow

Escrow is a third-party account that the lender sets up that receives monthly payments from the buyer. Most often, the “value” the third party holds onto is the buyer’s earnest money check. When the transaction is complete (usually at closing), the third party releases those funds to the seller.

Exclusive agency listing

An exclusive agency listing gives home sellers the opportunity to find a buyer on their own OR with the help of a listing agent. Most home sellers avoid exclusive agency agreements since they can end in disputes over who sourced the buyer when the home sells.

» SEE: For sale by owner

Exclusive right to sell

In an exclusive right to sell agreement (the most common type of listing agreement), a seller agrees to work with a single listing agent throughout the real estate process. And no matter who ultimately buys the home — or how the buyer finds out about it — the seller will pay an agreed-upon listing fee to this agent at closing.

F

Federal Housing Administration (FHA)

The Federal Housing Administration (FHA) insures home loans provided by private lenders. These lenders can make their loans more accessible to borrowers with low income, low credit, and high debt-to-income ratios — and be protected against any losses.

» SEE: Debt-to-income ratio

FHA loans

FHA loans are mortgages issued by the Federal Housing Administration. The FHA insures private home loans to make them more affordable, and they require smaller down payments than traditional loans.

FHA loans are designed for home buyers with low income, poor credit, and high debt-to-income ratios. They also require mortgage insurance, an expense that can add up over time.

Fixed-rate mortgage

A fixed-rate mortgage has a set interest rate for the length of the loan (usually 15 or 30 years), so the monthly payments on your mortgage won't change.

Fixed-rate mortgages are better insulated from economic changes and allow homeowners to budget with more certainty over the long term. However, these mortgages are much less customizable and usually need to be refinanced at some point.

» SEE: Adjustable-rate mortgages

Flat fee MLS

A flat fee MLS company will list your home on the local multiple listing service (MLS) for a set rate. MLS listings get posted to every major real estate website — like Zillow and Realtor.com — where other agents will see them and share with their clients.

While using a flat-fee MLS service could save you money on realtor commission, it also shifts most of the burden to you. You'll have to handle showings, setting the price, and purchase negotiations.

For sale by owner (FSBO)

A home for sale by owner (FSBO) is being sold without the help of a real estate agent. Sellers handle all of the steps and details of the sale themselves. FSBO works best if you already have a buyer lined up or if it's a hot market for sellers.

While selling FSBO can save you thousands of dollars on realtor commission, you likely won't be able to sell your home at the price you'd get when working with an agent.

Foreclosure

A foreclosure is when a homeowner stops making mortgage payments and defaults on their loan. The homeowner has to move out, and the lender sells the foreclosed home on the market or at a private real estate auction.

A foreclosure will show up on a homeowner's credit history report for seven years, and they may have trouble getting approved for future home loans.

H

Home sale contingency

A home sale contingency makes a sale dependent on a buyer selling their existing home by a specific date.

A home sale contingency can provide buyers an out if they aren't absolutely sure they can sell their current home. These are risky for sellers, since it adds a level of uncertainty to the sale.

Home warranty

A home warranty covers high repair costs for major appliances, electrical systems, and plumbing systems. It's similar to home insurance (which deals with unexpected damages), but it's optional and covers damage from normal wear and tear.

You pay both a monthly fee and a service fee for a home warranty, which can add up. Sometimes, a seller will offer to pay for a home warranty in exchange for a buyer waiving an inspection contingency.

Homeowners association (HOA)

A homeowners association (HOA) manages residential developments with shared features and spaces, like private roads or rec centers. Members — the homeowners within a development — elect their neighbors to the HOA board, which collects fees, disburses funds, holds meetings, and maintains common areas.

HOAs cover about a quarter of the U.S. housing stock, most commonly planned communities and condominiums. Being a member can come with a lot of perks, like access to amenities. However, monthly HOA fees can be expensive and many HOAs have strict rules that may prevent you from renovating your home.

I

iBuyer

An iBuyer is an online real estate company that makes cash offers for homes. Sales can close as quickly as within two weeks. iBuyers usually pay close to the fair market value (slightly below) for a home, and they focus almost exclusively on homes that need only minor repairs in major metro areas.

iBuyers are great options for homeowners hoping to sell quickly. Just remember the trade-off: a faster sale comes with a lower sale price.

Inspection

A home inspection is a thorough examination of a property's condition by a licensed professional. Home inspections usually take place BEFORE a home sale, though owners can schedule an inspection any time.

An inspection can focus on things like the home's structure, electrical system, air quality, mold and pests, and more. Most people pay $300–500 for an inspection.

L

Lien

A lien is a legal claim on an asset, like a house. A creditor can claim a lien on your house if you owe them money. If you don't pay up, they can receive your home as payment instead.

The most common type of lien is a tax lien. Homeowners can receive a tax lien against their home if they neglect to pay their property taxes.

Listing agent

A listing agent, also known as a seller's agent, represents the seller in a real estate transaction. The listing agent guides the seller through the process, markets the property, helps pick a buyer, and assists in negotiating the sale.

Listing agreement

A listing agreement is the contract a home seller signs with their agent. It outlines the seller’s obligations and the services the agent will provide, including the listing, marketing, and ultimately closing the real estate transaction. The contract typically expires after three to six months.

Listing agreements typically expire after three, six, or 12 months (depending on the market and property).

Listing fee

A listing fee is what you pay your real estate agent to sell your property. The fee typically comes out of the proceeds from that sale, though you can negotiate the amount with your agent.

The average listing fee is 2.72% of the final sale price. Listing fees are usually half of the total real estate commission included in a sale (typically 5–6%), with the other half going to the buyer's agent.

Loan contingency

A loan contingency, also known as a financing or mortgage contingency, is a term written into a purchase agreement that lets a buyer back out of a home purchase if they can't secure a loan without losing their earnest money deposit.

M

Multiple listing service (MLS)

A multiple listing service (MLS) is a local database that compiles all the information about homes for sale, such as their asking prices, number of bedrooms, and square footage. Listing with an agent gives a seller the opportunity to get the most exposure for their home.

Only licensed real estate agents have access to an MLS, though the listings are often pulled onto home-buying websites like Zillow.

N

National Association of Realtors (NAR)

The National Association of Realtors (NAR) is an industry trade group for real estate professionals like agents, brokers, and appraisers.

Its members are called Realtors (with an uppercase "R"). The NAR does NOT handle the licensing for any real estate professionals.

Net listing

A net listing is an agreement that a seller's agent will get paid from any extra proceeds from a home sale — not commission. So if you list your home for $250,000 and it sells for $265,000, your agent will get $15,000.

Net listings are rare and even banned in most states because they can result in the seller losing out on thousands of dollars.

Net sheet

A seller's net sheet outlines how much cash they can expect after closing on their home sale. It's prepped by a realtor for free and considers the home's sale price and any expenses tied to the sale, like closing costs and realtor commission.

O

Open listing

An open listing agreement is a non-exclusive contract between a seller and a real estate agent. A seller can work with multiple agents to find a buyer and only pay commission to the agent who brings in the final buyer.

Open listing agreements are good for sellers who want to cast a wider net for potential buyers while saving money on listing fees. They also give sellers the option of a FSBO transaction.

Owner financing

Owner financing, also known as seller financing, is when a buyer gets a loan from the current homeowner instead of from a bank. The seller then receives monthly mortgage payments rather than a lump sum at the sale.

Owner financing can be more attractive to buyers and help a property to sell faster. But sellers won't have a lump sum to put toward a new home, and buyers risk overpaying (since there's no appraisal).

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P

Pocket listing

Pocket listings are off-market properties. Instead of listing the property on the MLS, an agent will market the property to specific clients and groups of other agents.

Pocket listings are typically used for wealthy clients selling high-end homes (though the practice is becoming more common across incomes). They're also good for sellers who don't want to publicize why they're selling, like for a private life change such as divorce or financial troubles.

Power buyer

Power buyers are tech-oriented brokerages specializing in "buy-before-you-sell" services. They sell properties to buyers BEFORE the buyers have sold their current homes through a process called "up-front underwriting."

Power buyers' services allow homeowners to move without an overlap between their mortgages and sell their homes without contingencies attached to the sale — attracting potential buyers. But buyer-before-you-sell services also include service fees and operate within limited markets since power buyers are relatively new.

Probate sale

A probate sale is when a property is sold after the owner's death. Probate courts handle the process if the owner didn't pick someone to inherit the property, and the deceased's closest relative is appointed as the executor for this sale. The probate sale process varies by state, but it generally takes 18–36 months.

Probate sale properties sell for reduced prices BUT they're usually sold as-is, meaning the new owners will be responsible for any repairs.

Q

Quit-claim deed

A quit-claim deed is a transfer of a property from one owner to another — there's NO sale and no mortgage involved. These are pretty common for transfers between family members or divorcing spouses.

R

Real estate agent

A real estate agent (or realtor with a lowercase "r") is someone licensed to represent buyers and sellers during a sale. They market properties, connect buyers and sellers, and help negotiate purchase agreements.

Agents earn commission from real estate transactions, meaning they're paid a percentage of a property's sale price after closing.

Real estate–owned (REO)

A real estate–owned (REO) property is owned by a lender because it didn't sell at a foreclosure auction.

REO properties can offer great opportunities for investors, as they're usually sold at prices lower than others on the market. However, buying REO properties can come with some risks, like competition from other buyers and no knowledge of whether the home needs repairs.

Realtor

A Realtor with a capital "R" — or a REALTOR® — is a member of the NAR (an industry trade group for real estate professionals).

To be an NAR member, Realtors need to meet all of the criteria to be a real estate agent, like passing a licensing exam. While many real estate agents (or realtors with a lowercase "r") are Realtors, some opt out of NAR membership.

Realtor Code of Ethics

The National Association of Realtors' Code of Ethics sets conduct standards for how the group's members ("Realtors") interact with clients (you), one other, and the public. Realtors who violate these standards could face penalties from the NAR. (These cases aren't shared publicly, though.)

Refinancing

Refinancing your mortgage involves swapping your existing home loan for a new, more favorable one. You pay off your existing mortgage through a separate home loan — which might have lower interest rate or not require mortgage insurance — and can be financed by your current lender or a new one.

Rent-back agreement

A rent-back agreement, also known as a seller's temporary residential lease or a lease-back agreement, is a legal agreement that allows a home seller to stay in their home for up to 60 days after closing, renting it from the new homeowner.

This gives the outgoing homeowner more time to move and the buyer some extra cash. Rent is often around how much the buyer would pay on their mortgage.

S

Seller's agent

A seller's agent, also known as a listing agent, represents a home seller when they're looking for and negotiating with buyers. The seller's agent guides the seller through the selling process, markets the property, assists in picking a buyer, and helps negotiate the sale.

A seller's agent has several legal responsibilities to their client, including acting in the client's best financial interest.

Selling agent

A selling agent, also known as a buyer's agent, represents a BUYER throughout a real estate transaction. Selling agents help buyers find potential properties, contact listing agents, and negotiate a sale.

Short sale

A short sale is a process that allows homeowners experiencing financial hardship to sell their home and avoid foreclosure. A short sale begins when a home's mortgage exceeds the value of the property.

All proceeds from the sale go to your lender, and they might forgive the rest of your mortgage. While you won't walk away with as much as you would with a traditional sale, a short sale can help you avoid credit history penalties you'd otherwise see with a foreclosure.

T

Title insurance

Title insurance covers court costs associated with ownership disputes. It can protect the homeowner or the lender.

During a home sale, the buyer and seller usually determine which party pays for title insurance. Lenders often require title insurance as a condition of the mortgage, but it's optional for the homeowners.

U

Under contract

A property is under contract when a home seller accepts a formal offer from a buyer. This doesn't mean the sale is finalized, just that the two sides are negotiating the finer details of the contract.


At Clever, we pride ourselves on sharing accurate, accessible real estate content. To ensure accuracy and clarity, the definitions on this page were reviewed by:

  • JC Young, a Texas-based realtor with 10 years in real estate and author of several real estate books, including How to Sell Hard to Sell Homes

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