Whether you’ve hired a real estate lawyer (as some places require) or have a seasoned agent to simplify it all for you, it’s helpful to understand some of the more nuanced terms you’ll encounter on your real estate journey. Here are some of the most common:
Appraisal
A valuation of property by a qualified individual who uses his or her experience to prepare the appraisal estimate.
Appraisal fee
Fee charged by an appraiser to estimate the market value of a property.
Appreciation An increase in property value.
As-is condition The purchase or sale of a property in its existing condition, without repairs.
Asking price A seller’s stated price for a property and a starting point for negotiations.
Assumption clause
A provision in the terms of a loan that allows the buyer to take legal responsibility for the mortgage from the seller.
Back-to-back escrow
Arrangements that an owner makes to oversee the sale of one property and the purchase of another at the same time.
Capital improvements
Property improvements that either will enhance the property value or will increase the useful life of the property.
Capital, or cash reserves An individual’s savings, investments or assets.
Certification of title
A certificate of ownership stating that the title to the specified property is free and clear except for a mortgage.
Closing
The fulfillment of a contract especially for the sale of real estate.
Closing costs Fees for final property transfer not included in the price of the property. Typical closing costs include fees, taxes, and insurance payments that are due when you sign a mortgage and take possession of the apartment. These vary based on purchase price and the mortgage itself.
Co-signer A person who signs a credit application with another person, and assumes equal responsibility for the loan’s repayment.
Credit report
A report generated by the credit bureau that contains the borrower’s credit history for the previous seven years.
Credit risk
A term used to describe the possibility of default on a loan by a borrower.
Credit score A score calculated by using a person’s credit report to determine the likelihood of a loan being repaid on time. Scores range from about 360 to 840. A lower score means a person is a higher risk.
Deed A written instrument by which a person transfers ownership of property to another.
Down payment
The portion of a home’s purchase price that is paid in cash and is not part of the mortgage loan.
Escrow account A deposit of funds – controlled by a third party, typically a seller’s attorney – until the consummation or termination of the transaction.
Joint tenancy Two or more owners share ownership and rights to the property. If a joint owner dies, his or her share typically passes to the other owners, without probate.
Lender A term referring to a person or company that makes loans for real estate purchases; sometimes referred to as a loan officer.
Mansion tax A real estate transfer tax imposed on high-end home purchases in certain jurisdictions, typically starting at a specific price threshold and paid by the buyer.
Market value The price at which a buyer is ready and willing to buy and a seller is ready and willing to sell.
Mortgage A legal agreement by which a bank or other creditor lends money at interest in exchange for taking a lien on the debtor’s property.
Preapproval A lender commits to lend to a potential borrower a specific or maximum loan amount based on a completed loan application, credit reports, and debt and savings statements, all of which have been reviewed by an underwriter. Preapproval could happen before a property search begins or while the search is in progress.
Punch list A list of items that have not been completed at the time of the final walkthrough of a newly purchased apartment, but for which the seller remains liable.
Terms The period of time and the interest rate agreed upon by the lender and the borrower to repay a loan.
Transfer of ownership Any means by which ownership of a property changes hands. These include purchase of a property, assumption of mortgage debt, or exchange of possession of a property.
Transfer tax
A transactional tax on home sales, typically based on sales price.
Walk-through
The final inspection by the buyer of a property being sold; the intent is to confirm that any contingencies specified in the purchase agreement such as repairs have been completed.
