Real Estate Terms
Buying a Home
Appraisal Contingency
A contract provision allowing the buyer to renegotiate or cancel the purchase if the home appraises for less than the agreed purchase price. It helps protect buyers from paying more than a lender believes the home is worth.
Buyer's Closing Costs
The expenses a buyer pays to complete a home purchase, such as lender fees, title fees, taxes, and insurance. The exact amount varies depending on the loan and location.
Escalation Clause
A contract provision automatically increasing a buyer's offer if competing offers are received, up to a specified limit. It is commonly used in competitive real estate markets.
Financing Contingency
A condition allowing the buyer to cancel the contract if they cannot obtain financing within the agreed timeframe. This contingency protects buyers from being obligated to purchase without a loan.
Highest and Best Offer
A seller's request for buyers to submit their strongest offer by a specific deadline. Buyers are generally expected to provide their final price and terms.
Home Sale Contingency
A contract provision making the purchase dependent on the buyer successfully selling their current home. Sellers may accept or reject this condition depending on market conditions.
Home Search
The process of identifying properties that match a buyer's needs. Buyers often work with an agent and online search tools during this stage.
Home Warranty
A service contract covering the repair or replacement of certain home systems and appliances after closing. Coverage varies by provider and plan.
Multiple Offer Situation
A circumstance where more than one buyer submits an offer on the same property. Sellers typically evaluate price, financing, and contract terms before making a decision.
Open House
A scheduled event allowing potential buyers to tour a property without a private appointment. Open houses help generate interest and exposure for a listing.
Seller Concession
Money or other financial assistance provided by the seller to help cover a buyer's closing costs or other eligible expenses. Loan program limits may apply.
Showing
A private appointment allowing prospective buyers to tour a home. Buyers should respect the property and follow any showing instructions.
Walkthrough
The buyer's final inspection of the property shortly before closing. It confirms the home's condition matches the contract and that agreed repairs have been completed.
Selling a Home
List Price
The initial asking price established when a home is placed on the market. Proper pricing helps attract qualified buyers.
Marketing Plan
The strategy used to promote a property to potential buyers through online listings, photography, advertising, social media, and other channels. A strong marketing plan increases visibility.
Net Proceeds
The amount a seller receives after paying off the mortgage and deducting closing costs and other expenses. Net proceeds are often estimated before listing.
Professional Photography
High-quality listing photos taken by a professional photographer. Strong photography often improves online engagement and showing activity.
Seller Disclosure
A document describing known facts or defects about a property. Disclosure requirements vary by state.
Seller Net Sheet
An estimate showing how much money a seller may receive after closing costs and other expenses are deducted. It helps sellers understand their financial outcome.
Showing Feedback
Comments provided by buyers or their agents after touring a property. Feedback helps sellers evaluate pricing, condition, and presentation.
Staging
Preparing and furnishing a home to make it more appealing to buyers. Effective staging can improve first impressions and perceived value.
Mortgage & Financing
2-1 Buydown
A temporary financing arrangement that reduces the mortgage interest rate by two percent in the first year and one percent in the second year. The loan then returns to its permanent rate.
3-2-1 Buydown
A temporary financing arrangement reducing the interest rate over the first three years of the loan. Monthly payments gradually increase until reaching the permanent rate.
Bridge Loan
A short-term loan that helps homeowners buy a new home before selling their current one. It provides temporary access to home equity.
Cash to Close
The total amount of money a buyer must bring to closing after accounting for the loan amount, earnest money, and credits. The lender provides this figure before settlement.
Closing Funds
Money required to complete a real estate transaction at closing. These funds typically include the down payment and closing costs.
Gift Funds
Money given by an eligible donor to help a buyer purchase a home. Most loan programs require documentation showing the funds are a gift rather than a loan.
Loan Commitment Letter
A document from the lender stating that the borrower has been approved for financing subject to any remaining conditions. Sellers often view this as a sign of a strong buyer.
Mortgage Commitment
The lender's formal approval to provide financing once specified conditions have been satisfied. Final approval is typically required before closing.
Mortgage Contingency
A contract provision allowing the buyer to cancel the purchase if financing cannot be obtained. It helps reduce financial risk during the transaction.
Mortgage Lock Extension
An agreement extending an existing interest rate lock beyond its original expiration date. Extension fees may apply depending on the lender.
General
Abstract of Title
A summary of the public records showing the ownership history and legal status of a property. Title companies review it to help ensure ownership can be transferred without unresolved claims.
Accrued Interest
Interest that has accumulated on a loan but has not yet been paid. It is often collected at closing or with the next scheduled payment.
Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes after an initial fixed period. Monthly payments may increase or decrease depending on market conditions.
Agency
The legal relationship between a real estate professional and the client they represent.
Agency Disclosure
A document explaining who a real estate professional represents during a transaction. Buyers and sellers should review it before signing agreements.
Amortization
The process of gradually paying off a mortgage through regular principal and interest payments. Over time, more of each payment goes toward principal.
Amortization Schedule
A payment schedule showing how each mortgage payment is divided between principal and interest. It also displays the remaining loan balance after each payment.
Annual Percentage Rate (APR)
The yearly cost of borrowing money, including the interest rate and certain lender fees. APR helps compare mortgage offers more accurately.
Appreciation
An increase in a property's value over time because of market conditions, improvements, or demand. Appreciation is one of the primary ways homeowners build wealth.
As-Is Sale
A property sold in its current condition without the seller agreeing to make repairs. Buyers should still perform inspections whenever possible.
Assessed Value
The value assigned by a local government for property tax purposes. It may differ from the home's market value.
Assumable Mortgage
A mortgage that an eligible buyer can take over from the current homeowner. This can be valuable when the existing interest rate is lower than current market rates.
Broker
A licensed real estate professional authorized to supervise agents and operate a brokerage. Brokers generally complete additional education beyond agent licensing.
Builder Warranty
Coverage provided by a home builder for certain defects in a newly constructed home. Warranty terms vary by builder and component.
Building Code
Local regulations establishing minimum construction and safety standards. Homes and renovations are generally required to comply with applicable codes.
Buydown
An upfront payment used to reduce a mortgage interest rate temporarily or permanently. A buydown can lower monthly mortgage payments.
Buyer's Agent
A real estate professional who represents the buyer throughout the purchase process. They help with property searches, negotiations, contracts, and closing.
Buyer's Market
A market where there are more homes for sale than buyers. Buyers generally have greater negotiating power in these conditions.
Capital Gains
The profit earned when selling a property for more than its purchase price. Certain homeowners may qualify for tax exclusions on primary residences.
Capital Improvements
Permanent upgrades that add value to a property or extend its useful life. Examples include a new roof or kitchen remodel.
Cash Offer
An offer to purchase a property without mortgage financing. Cash offers often close more quickly and may be more attractive to sellers.
Certificate of Occupancy
A document confirming that a property meets building and safety requirements for occupancy. It is commonly required before a new home can be occupied.
Clear Title
Ownership that is free from unresolved liens, claims, or legal disputes. Clear title is generally required before closing.
Closing
The final stage of a real estate transaction when ownership officially transfers from seller to buyer. Documents are signed and funds are distributed.
Closing Costs
The fees and expenses paid to complete a real estate transaction. They often include lender fees, title charges, taxes, insurance, and recording fees.
Comparable Sales (Comps)
Recently sold properties similar to a subject property in size, location, and features. They are used to estimate market value.
Comparative Market Analysis (CMA)
A report prepared using comparable sales and current market trends to estimate a home's value. It helps buyers and sellers make informed pricing decisions.
Condominium (Condo)
A property where an owner owns an individual unit while sharing ownership of common areas. Condominiums are typically governed by a homeowners association.
Construction Loan
A short-term loan used to finance the construction of a new home. It usually converts into a permanent mortgage after construction is complete.
Contingency
A condition that must be satisfied before a real estate contract becomes fully binding. Common contingencies involve financing, inspections, or appraisals.
Conventional Loan
A mortgage that is not insured or guaranteed by a government agency. Qualification requirements are generally based on credit, income, and down payment.
Counteroffer
A response that changes the terms of an original offer instead of accepting it. Negotiations continue until both parties reach an agreement or walk away.
Curb Appeal
The attractiveness of a property's exterior when viewed from the street. Strong curb appeal can increase buyer interest and perceived value.
Days on Market (DOM)
The number of days a property has been actively listed for sale. Buyers and sellers often use this metric to evaluate market activity.
Deed
The legal document transferring ownership of real property. It is recorded in public land records after closing.
Disclosure
Information a seller provides about the property's condition or history. Disclosures help buyers make informed decisions.
Earnest Money
A good-faith deposit submitted with an offer to demonstrate a buyer's commitment. The funds are generally applied toward the purchase at closing.
Easement
A legal right allowing another party to use part of a property for a specific purpose. Utility companies commonly hold easements.
Equity
The difference between a home's market value and the amount still owed on the mortgage. Homeowners build equity by paying down debt and through appreciation.
Escrow
A process in which a neutral third party holds funds or documents until contract conditions are satisfied. Escrow helps protect both buyers and sellers.
Fixture
An item permanently attached to a property that is generally included in the sale. Examples include built-in cabinets and lighting.
Homeowners Association (HOA)
An organization that manages common areas and community rules. Property owners typically pay HOA dues.
Inspection Contingency
A contract provision allowing the buyer to inspect the property before completing the purchase. It provides an opportunity to negotiate repairs or withdraw under certain conditions.
Listing
A property offered for sale through a real estate brokerage. Listing information is commonly shared through the MLS.
Listing Agent
The real estate professional representing the seller. They assist with pricing, marketing, negotiations, and closing.
Market Value
The estimated price a property would likely sell for in today's market. It is influenced by location, condition, demand, and comparable sales.
Multiple Listing Service (MLS)
A cooperative database used by real estate professionals to share property listings. The MLS helps expose homes to a broader pool of buyers.
Offer
A written proposal from a buyer to purchase a property under specific terms. An offer becomes a contract after acceptance by the seller.
Pending
A property with an accepted offer that has not yet closed. The transaction is usually completing inspections, financing, or other contract requirements.
Property Taxes
Taxes assessed by local governments based on a property's assessed value. These taxes help fund schools and public services.
Title
The legal ownership rights to a property. A clear title is essential for transferring ownership.
Lending
Ability-to-Repay (ATR) Rule
A federal rule requiring lenders to make a reasonable determination that a borrower can repay a mortgage. It helps protect consumers from unaffordable loans.
Biweekly Mortgage
A payment schedule where half of the monthly mortgage payment is made every two weeks. This can reduce interest paid and shorten the loan term.
Cash-Out Refinance
A refinance that replaces your existing mortgage with a larger loan and provides the difference in cash. Homeowners often use the funds for renovations or debt consolidation.
Closing Disclosure
A document summarizing the final loan terms and closing costs. Borrowers receive it before closing to review their mortgage details.
Co-Borrower
A person who shares legal responsibility for repaying a mortgage. Both borrowers' income and credit are typically considered during approval.
Co-Signer
Someone who guarantees repayment of a loan without owning the property. A co-signer may improve a borrower's ability to qualify.
Conforming Loan
A mortgage meeting loan limits and guidelines established for purchase by government-sponsored enterprises. These loans often offer competitive rates.
Discount Points
Optional upfront fees paid to lower a mortgage interest rate. One point usually equals one percent of the loan amount.
Loan Servicer
The company that collects mortgage payments and manages the loan after closing. The servicer may be different from the original lender.
Mortgage Servicing Rights
The contractual right to collect payments and administer a mortgage. These rights are frequently bought and sold between financial institutions.
Occupancy Requirement
A lender's requirement describing how a property will be used, such as a primary residence, second home, or investment property. Occupancy affects loan eligibility and pricing.
Origination Fee
A lender fee charged for processing and underwriting a mortgage. It is included in closing costs.
PITI
An acronym for Principal, Interest, Taxes, and Insurance. These four costs make up a typical monthly mortgage payment.
PMI
Private Mortgage Insurance (PMI) is a type of insurance that protects the lender if a borrower defaults on a conventional loan with less than a 20% down payment. PMI is typically paid monthly as part of the mortgage payment and can often be removed once the homeowner has built enough equity in the property.
Qualifying Income
The income a lender uses to determine whether a borrower qualifies for a mortgage. Documentation requirements vary depending on the loan program.
Rate Float
The decision to wait before locking a mortgage interest rate. Borrowers who float their rate accept the risk that rates could increase.
Recast
A process that lowers monthly mortgage payments after making a large principal payment without refinancing. Not all lenders offer mortgage recasting.
Residual Income
The amount of income remaining after paying monthly obligations. Some government-backed loan programs use residual income as a qualification factor.
Secondary Mortgage Market
The marketplace where lenders sell existing mortgages to investors. Selling loans helps lenders provide financing to new borrowers.
Verification of Assets (VOA)
Documentation confirming the funds available in a borrower's financial accounts. Lenders use it to verify down payment and reserve funds.
Verification of Employment (VOE)
Confirmation of a borrower's employment status and income. Lenders often complete this shortly before closing.
Verification of Income (VOI)
Documentation supporting a borrower's earnings, such as pay stubs or tax returns. Income verification is a key part of mortgage underwriting.
Appraisal
Appraisal Adjustment
A dollar amount added to or subtracted from a comparable sale to account for differences from the subject property. Adjustments help estimate a home's value more accurately.
Appraisal Gap
The difference between the contract price and the appraised value when the appraisal is lower than the purchase price. Buyers and sellers may renegotiate or the buyer may pay the difference.
Appraisal Report
The written document prepared by an appraiser explaining the property's value and the data supporting the conclusion. Lenders use this report when making loan decisions.
Appraiser
A state-licensed professional who estimates the market value of real estate. Appraisers are required to remain independent and impartial.
Bracketing
An appraisal technique that compares a property with similar homes that are slightly superior and slightly inferior. This helps establish a reasonable value range.
Comparable Adjustment
A modification made to the value of a comparable sale to account for differences such as size, condition, or features. The goal is to create a fair comparison.
Cost Approach
An appraisal method that estimates value based on the cost to replace the property minus depreciation plus land value. It is commonly used for newer or unique properties.
Depreciation (Appraisal)
The loss in property value caused by age, wear, design issues, or external influences. Appraisers consider depreciation when using the cost approach.
Effective Age
An appraiser's opinion of a home's functional age based on its condition rather than its actual age. Well-maintained homes often have a lower effective age.
Gross Living Area (GLA)
The total finished above-grade living space measured according to appraisal standards. Basements are generally reported separately from GLA.
Highest and Best Use
The legally permissible and financially feasible use of a property that results in the greatest value. Appraisers evaluate this when determining market value.
Income Approach
An appraisal method based on a property's ability to generate income. It is most commonly used for rental and commercial properties.
Market Conditions Adjustment
A value adjustment reflecting changes in the real estate market between the sale date of a comparable property and the appraisal date. Rising or falling markets may require adjustments.
Replacement Cost
The estimated cost to build a similar home using modern materials and construction methods. Replacement cost is often used for insurance and appraisal purposes.
Reproduction Cost
The estimated cost to build an exact replica of a property using the same materials and design. This method is most often used for historic properties.
Sales Comparison Approach
The most common residential appraisal method using recent comparable sales to estimate value. It reflects how buyers typically evaluate homes.
Subject Property
The property being evaluated in an appraisal. All comparable sales and adjustments are measured against the subject property.
Uniform Residential Appraisal Report (URAR)
The standardized appraisal form commonly used for single-family residential mortgage transactions. It summarizes the property's characteristics, comparable sales, and value conclusion.
Homeowners Insurance
Actual Cash Value (ACV)
A claims settlement method that pays the value of damaged property after depreciation is deducted. Older items generally receive lower payouts than newer ones.
Additional Living Expenses (ALE)
Coverage that helps pay temporary housing and certain extra costs if your home becomes uninhabitable after a covered loss. Limits vary by policy.
Claim
A request submitted to an insurance company for payment after a covered loss. The insurer investigates the claim before determining coverage.
Coverage Limit
The maximum amount an insurance company will pay for a covered loss. Different parts of a policy may have different limits.
Declarations Page
The summary page of an insurance policy listing the insured property, coverage amounts, deductibles, and policy dates. It serves as a quick overview of the policy.
Deductible
The amount a homeowner pays out of pocket before insurance coverage begins. Choosing a higher deductible often lowers the insurance premium.
Dwelling Coverage
Insurance that protects the physical structure of your home against covered risks. It is one of the primary components of a homeowners policy.
Exclusion
A situation, event, or type of damage that is not covered by an insurance policy. Reading exclusions carefully helps homeowners understand potential gaps in coverage.
Hazard Insurance
Insurance covering damage to a home caused by certain covered events such as fire, wind, or hail. Mortgage lenders commonly require hazard insurance.
Liability Coverage
Insurance protecting homeowners if they are legally responsible for injuries or property damage to others. It may also help cover legal defense costs.
Loss of Use
Insurance that helps cover additional living expenses if a covered event makes your home temporarily uninhabitable. It is often included within homeowners policies.
Named Perils
Coverage that applies only to specific causes of loss listed in the policy. Damage caused by unlisted events is generally not covered.
Personal Property Coverage
Insurance protecting belongings such as furniture, clothing, and electronics against covered losses. Coverage limits may apply to certain valuables.
Replacement Cost Coverage
Coverage that pays the cost to repair or replace damaged property without deducting depreciation, subject to policy terms. It generally provides greater protection than actual cash value coverage.
Rider
An optional addition that increases or expands insurance coverage for specific property or risks. Riders are commonly used for jewelry, collectibles, or expensive electronics.
Scheduled Personal Property
Coverage specifically listing valuable items individually with their insured value. Scheduling often provides broader protection than standard personal property coverage.
Umbrella Insurance
Additional liability insurance that extends beyond the limits of homeowners and auto policies. It helps protect against large liability claims.
Vacancy Clause
A policy provision limiting or changing coverage if a home remains vacant for an extended period. Homeowners should notify their insurer before leaving a property vacant.
HOA & Community Association
Architectural Review Committee (ARC)
A committee that reviews homeowner requests for exterior changes before work begins. The ARC helps maintain the community's appearance according to HOA standards.
Assessment
A fee charged by a homeowners association to pay for community expenses. Assessments may be regular or one-time depending on the association's needs.
Board of Directors
The elected group of homeowners responsible for managing the association and making community decisions. Board members oversee budgets, rules, and long-term planning.
Bylaws
The governing rules describing how an association operates and conducts business. Bylaws typically address elections, meetings, and board responsibilities.
Capital Reserve Fund
Money set aside by the association for major future repairs and replacements. Healthy reserve funds can reduce the need for unexpected special assessments.
CC&Rs (Covenants, Conditions & Restrictions)
The recorded rules that govern how properties within the community may be used. Buyers should review the CC&Rs before purchasing a home in an HOA.
Common Area
Property owned or maintained by the association for the benefit of residents. Common areas may include parks, pools, sidewalks, clubhouses, or private roads.
Community Guidelines
Policies explaining everyday expectations for residents beyond the governing documents. They often address landscaping, parking, pets, and exterior maintenance.
Condominium Association
An organization responsible for managing and maintaining a condominium community. It oversees shared property, finances, and community rules.
Fine
A monetary penalty imposed for violating association rules when permitted by the governing documents. Associations generally provide notice before assessing a fine.
Governing Documents
The collection of legal documents that establish and regulate an association. These typically include the declaration, bylaws, and community rules..
Special Assessment
An additional fee charged to homeowners for unexpected expenses or major projects not covered by the regular budget. Special assessments may be collected as a lump sum or over time.
Contracts
Acceptance
The seller's agreement to all terms of a buyer's offer without changes. Once accepted and communicated, the agreement generally becomes legally binding.
Addendum
A written document that adds to or modifies an existing real estate contract. All parties typically must agree before an addendum becomes effective.
Backup Offer
An offer submitted on a property that is already under contract. The backup offer may become effective if the first contract is terminated.
Breach of Contract
The failure of one party to fulfill the obligations outlined in a contract. A breach may give the other party legal remedies depending on the agreement.
Cancellation Agreement
A written document signed by the parties to terminate a real estate contract. It also outlines how earnest money or other obligations will be handled.
Closing Date
The date scheduled for ownership of the property to transfer from seller to buyer. The parties may agree to change the closing date if necessary.
Contract Deadline
A specific date or time by which a contractual obligation must be completed. Missing a deadline may affect a party's rights under the agreement.
Contract Execution
The point at which all parties have signed a contract and it becomes fully executed. Execution generally marks the beginning of contractual deadlines.
Counterproposal
A revised proposal made in response to an offer or counteroffer. It rejects the previous offer while presenting new terms.
Due Diligence Period
The timeframe during which a buyer investigates the property before fully committing to the purchase. Buyers commonly complete inspections and review documents during this period.
Exclusive Buyer Agency Agreement
A contract giving one real estate brokerage the exclusive right to represent a buyer. It outlines the relationship and responsibilities between the buyer and brokerage.
Exclusive Listing Agreement
A contract authorizing one brokerage to market and sell a property. It establishes the broker's responsibilities and compensation.
Expiration Date
The date on which an offer or contract automatically expires if certain actions have not occurred. Expiration dates help keep negotiations moving.
Mediation
A process in which a neutral third party helps resolve disputes without going to court. Mediation is often required before litigation.
Mutual Acceptance
The point at which both buyer and seller agree to identical contract terms. Mutual acceptance creates an enforceable agreement.
Notice to Perform
A formal notice requiring a party to complete a contractual obligation within a specified time. Failure to comply may result in contract termination.
Possession Date
The date the buyer is entitled to occupy the property. Possession may occur on the closing date or another agreed-upon date.
Purchase Agreement
The primary legal contract outlining the terms and conditions of a real estate sale. It identifies the parties, purchase price, deadlines, and obligations.
Ratification
The process by which all parties formally approve and finalize a contract. Once ratified, the agreement generally becomes binding.
Waiver
The voluntary decision to give up a contractual right or requirement. Waivers should generally be documented in writing.
Walk-Away Right
A contractual provision allowing a party to terminate the agreement under specific conditions. The availability of this right depends on the contract language.
New Construction
Blueprint
A detailed technical drawing showing the layout, dimensions, and construction details of a home. Builders use blueprints as the primary guide during construction.
Change Order
A written agreement modifying the original construction contract after work has begun. Change orders may affect the project's cost or completion date.
Concrete Slab
A flat concrete foundation poured directly on the ground to support a home. Slab foundations are common in warmer climates.
Custom Home
A home designed and built to a buyer's specific preferences rather than from a standard floor plan. Buyers typically have greater control over finishes and layout.
Drywall
Panels used to create interior walls and ceilings after framing is complete. Drywall is finished with tape, joint compound, and paint.
Elevation
A drawing or image showing one side of a home's exterior design. Builders often offer multiple front elevation options for the same floor plan.
Engineered Hardwood
Flooring made with a real hardwood surface attached to layered wood products. It provides the appearance of hardwood with improved dimensional stability.
Final Walkthrough Punch List
A list of unfinished items or defects identified before the buyer accepts a newly constructed home. Builders generally complete these items before or shortly after closing.
Floor Plan
A scaled drawing showing the arrangement of rooms, walls, doors, and windows. Buyers often compare floor plans before selecting a new construction home.
Footing
The widened concrete base that supports a home's foundation. Properly constructed footings help distribute the building's weight.
Framing
The stage of construction where the structural skeleton of the home is built. Framing includes walls, floors, and roof supports.
General Contractor
The company or individual responsible for managing construction and coordinating subcontractors. The general contractor oversees the project from start to finish.
Green Building
Construction practices designed to improve energy efficiency, indoor air quality, and environmental sustainability. Green features may lower long-term operating costs.
Lot Premium
An additional cost for a desirable home site within a community. Premium lots may offer larger yards, better views, or more privacy.
Model Home
A professionally furnished home showcasing a builder's floor plan and available upgrades. Buyers tour model homes when selecting a new construction property.
Open Floor Plan
A home design with fewer interior walls between major living spaces. Open floor plans create larger shared areas and improve natural light.
Permit
Official approval from a local government allowing construction to begin. Permits help ensure work complies with applicable building codes.
Punch List
A checklist of incomplete or defective work that should be corrected before final project completion. Buyers often review the punch list during the final walkthrough.
Rough-In
The construction phase when plumbing, electrical, and HVAC systems are installed before insulation and drywall. Rough-ins are typically inspected before walls are closed.
Site Plan
A drawing showing the home's location on the lot, including setbacks, driveways, utilities, and grading. Site plans are part of the construction approval process.
Spec Home
A home built by a developer without a specific buyer under contract. Spec homes are often move-in ready or nearing completion.
Warranty Period
The timeframe during which the builder agrees to repair covered construction defects. Coverage varies depending on the builder and the type of component.
Property Taxes
Assessment Appeal
The formal process of requesting a review of a property's assessed value if the owner believes it is too high. A successful appeal may reduce future property taxes.
Assessment Notice
A document issued by the local taxing authority showing a property's assessed value. Property owners should review it carefully for accuracy.
Homestead Credit
A property tax benefit available in some jurisdictions for qualifying primary residences. Eligibility rules and savings vary by location.
Homestead Exemption
A tax exemption that reduces the taxable value of a homeowner's primary residence. Many states offer this benefit to qualifying homeowners.
Levy
The official imposition of a property tax by a taxing authority. The levy determines how much revenue will be collected.
Property Assessment
The process of determining a property's taxable value for local tax purposes. Assessments are typically performed by a government assessor.
Property Tax Bill
The statement issued by the local government showing the amount of property taxes owed. Bills usually include payment deadlines and tax breakdowns.
Property Tax Deferral
A program allowing eligible homeowners to postpone payment of some property taxes until a later date. Qualification requirements vary by jurisdiction.
Property Tax Exemption
A reduction or elimination of property taxes for qualifying properties or homeowners. Exemptions may be based on residency, age, disability, or veteran status.
Property Tax Rate
The percentage or millage applied to a property's taxable value to calculate property taxes. Rates are established by local taxing authorities.
Reassessment
A new evaluation of a property's taxable value performed by the local assessor. Reassessments may occur periodically or after significant property changes.
Tax Lien Certificate
A certificate representing unpaid property taxes that may be sold to investors in certain states. Rules governing tax lien certificates vary by jurisdiction.
Taxable Value
The value of a property after applicable exemptions or adjustments have been applied. Property taxes are calculated using this amount rather than market value in many jurisdictions.
Title & Closing
Affidavit of Title
A sworn statement from the seller confirming there are no undisclosed ownership issues or legal claims affecting the property. Title companies often require it before closing.
ALTA Settlement Statement
A standardized document summarizing the financial details of a real estate transaction. It clearly shows the credits and debits for buyers and sellers.
Closing Agent
A neutral professional who coordinates the closing process and ensures documents and funds are properly exchanged. This role may be performed by a title company or attorney depending on the state.
Closing Protection Letter
A document issued by a title insurer protecting buyers and lenders from certain mistakes or misconduct by the closing agent. Coverage is subject to the letter's terms.
Deed of Trust
A security instrument used in some states instead of a traditional mortgage. It involves the borrower, lender, and an independent trustee.
Document Recording
The process of filing legal real estate documents with the local government after closing. Recording creates a public record of ownership.
Encroachment
A structure or improvement that extends onto another person's property. Encroachments may require legal resolution before closing.
Encumbrance
A claim, restriction, easement, or lien that affects a property's title. Some encumbrances limit how the property may be used.
General Warranty Deed
A deed providing the highest level of protection by guaranteeing the seller has clear ownership and the legal right to transfer the property. It also protects against many past title issues.
Grant Deed
A deed stating the property has not already been sold to someone else and is free from undisclosed encumbrances created by the seller. It provides more protection than a quitclaim deed.
Judgment Lien
A lien placed on a property because of an unpaid court judgment. It generally must be resolved before ownership can be transferred.
Notary Public
A state-authorized official who verifies identities and witnesses signatures on legal documents. Many closing documents require notarization.
Owner's Title Insurance Policy
A title insurance policy protecting the buyer against covered ownership claims that existed before closing. Coverage generally lasts as long as the buyer owns the property.
Plat Map
A recorded map showing property boundaries, lots, easements, and rights-of-way within a subdivision. Buyers often review plat maps during due diligence.
Proration
The division of expenses such as property taxes, HOA dues, or utilities between buyer and seller based on the closing date. Prorations are calculated during settlement.
Recording Fee
A government fee charged to officially record legal real estate documents. Recording fees are listed as part of closing costs.
Right-of-Way
The legal right allowing someone to travel across or access part of another person's property. Many roads and utility easements include rights-of-way.
Settlement Agent
The professional responsible for coordinating the closing, collecting funds, and preparing settlement documents. This role is commonly performed by a title company or attorney.
Title Commitment
A preliminary document outlining the conditions under which a title insurance policy will be issued. It identifies title issues that must be resolved before closing.
Title Search
The process of reviewing public records to identify liens, easements, ownership history, and other matters affecting title. It is a standard part of most real estate transactions.
Trustee
A neutral third party named in a deed of trust who holds legal title until the loan is repaid. The trustee may initiate foreclosure if the borrower defaults.
Wire Instructions
Official directions explaining where closing funds should be electronically transferred. Buyers should always verify wire instructions to avoid fraud.