A Complete Glossary: 50 Real Estate Terms from A to Z (2024)

FAQs

What are the terms of a real estate contract? ›

It outlines the expectations of the homebuyer and seller. Real estate contracts need to be in writing to be enforceable. A real estate contract generally covers terms of finance, seller assist, home inspection, fixture and appliances, closing date, sale of existing home, etc.

Assessed value: The value assigned to a real estate property that is used to determine its property tax rate.

When an agent joins a brokerage with a 100% commission model, they receive 100% of the commission with each transaction. Typically, there is a monthly fee attached with being a part of that brokerage as well as some sort of transaction fee with each transaction.

This is a simple enough question and one many investors ask when checking on their progress toward retirement. The “4% rule” is a theory that states you should be able to retire and safely withdraw 4% of your savings every year and your money should last 30 years.

The GRM formula is: GRM = Purchase Price or Value / Gross Rental Income. For example, if a property is purchased for $200,000 and the annual rent income is $24,000, the GRM would be: GRM = 200,000 / 24,000 = 8.3. This number can then be compared to similar properties in the area to see if the purchase price is fair.

A purchase agreement is the most common type of real estate agreement. This contract specifies the details regarding the sale of property. It will include the address of the property, the price, names of both parties, signatures of both parties, and the closing date.

Typically, contract terms can be defined into three categories: conditions, warranties, or innominate terms.

Bailment: This describes a relationship between a “bailor” (or property owner) with a “bailee”, where the bailor transfers their property to the bailee.

What is another name for closing in real estate? ›

The "closing,” also called “settlement,” is when you and all the other parties in a mortgage loan transaction sign the necessary documents.

Like many rules of real estate investing, the 50 percent rule isn't always accurate, but it can be a helpful way to estimate expenses for rental property. To use it, an investor takes the property's gross rent and multiplies it by 50 percent, providing the estimated monthly operating expenses. That sounds easy, right?

A good rule is that a 1% increase in interest rates will equal 10% less you are able to borrow but still keep your same monthly payment. It's said that when interest rates climb, every 1% increase in rate will decrease your buying power by 10%. The higher the interest rate, the higher your monthly payment.

The 1% rule of real estate investing measures the price of the investment property against the gross income it will generate. For a potential investment to pass the 1% rule, its monthly rent must be equal to or no less than 1% of the purchase price.

The 70% rule can help flippers when they're scouring real estate listings for potential investment opportunities. Basically, the rule says real estate investors should pay no more than 70% of a property's after-repair value (ARV) minus the cost of the repairs necessary to renovate the home.

The 80% rule means that an insurer will only fully cover the cost of damage to a house if the owner has purchased insurance coverage equal to at least 80% of the house's total replacement value.

If less than 20% of your income goes to pay down debt, a home that is around 4 times your income may be suitable. If more than 20% of your monthly income goes to pay down existing debts in the household, dial the purchase price to 3 times.

They evaluate credit and payment history, income and assets available for a down payment and categorize their findings as the Three C's: Capacity, Credit and Collateral.

Is Real Estate Math Difficult? Real estate math is NOT difficult. Many students dread the idea of learning math and having to use math in their careers, however, real estate math is not challenging and there are only a few concepts that you need to master.

If you want to become a real estate agent, you'll need to understand basic math concepts to successfully complete the real estate exam and calculate day-to-day transactions in real life. The following are instances in which real estate agents need to know math: Real estate exam. Determining square footage.

What is the most basic piece of real estate? ›

Land is the baseline for all types of real property. Land typically refers to undeveloped property and vacant land.

The three most important factors when buying a home are location, location, and location. Too often I hear people talking about making decisions based on the home itself, instead of the location, and that is a mistake. What is it about the location that makes it so vital to real estate investing?

To prove the buyer's offer to purchase the property is made in good faith, the buyer makes an earnest money deposit (EMD).

A basic binding contract must comprise four key elements: offer, acceptance, consideration and intent to create legal relations.

Offer, acceptance, awareness, consideration, and capacity are the five elements of an enforceable contract.

An unconscionable contract is a contract that is so severely one-sided and unfair to one of the parties that it is deemed unenforceable under the law.

Key contract terms are the major provisions of a contract, which spell out contractual obligations, violating them can result in a breach of contract and lead to a legal action. It's common knowledge that a legally binding contract puts several relevant factors into consideration.

A contract terms glossary is a short dictionary of contract terms.

As of July 1, 2021, all Privately Owned Public Spaces (POPS) must fully comply with applicable zoning and other requirements.

What is a real estate word that starts with E? ›

There are four common types of real estate– industrial, commercial, land, and residential.

CS - Coming Soon: At the Seller's request a property may be entered into the Coming Soon Status. to prepare the home for showings, needed repairs, legal matters.

The acronym for the bundle of Rights is DEEP + C, or: Disposition – Essentially, this right protects the owner's ability to transfer ownership, either permanently by virtue of a sale or temporarily by leasing the property.

Concurrence. Like concur ("I concur with the assessment"), concurrence implies agreement.

A Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs).

On closing day, the ownership of the property is transferred to you, the buyer. This day consists of transferring funds from escrow, providing mortgage and title fees, and updating the deed of the house to your name.

In real estate, a lot or plot is a tract or parcel of land owned or meant to be owned by some owner(s). A plot is essentially considered a parcel of real property in some countries or immovable property (meaning practically the same thing) in other countries.

This is a general rule of thumb that determines a base level of rental income a rental property should generate. Following the 2% rule, an investor can expect to realize a gross yield from a rental property if the monthly rent is at least 2% of the purchase price.

A household should spend a maximum of 28% of its gross monthly income on total housing expenses according to this rule, and no more than 36% on total debt service. This includes housing and other debt such as car loans and credit cards. Lenders often use this rule to assess whether to extend credit to borrowers.

What is the cash flow rule in real estate? ›

The 1% rule

This rule states that there's a good chance you've found a cash-flowing property if it rents for at least 1% of the purchase price. For example: if you purchase a property for $100,000 it should rent for at least $1,000 per month to cash flow. $1,000 per month is 1% of the $100,000 purchase price.

By law, lenders can't underwrite the loan unless they can determine the borrower will be able to pay up the loan. The whole idea behind the 35-percent rule of thumb is this: a borrower can afford no more than 35% of its monthly take-home pay.

To calculate how much house you can afford, use the 25% rule—never spend more than 25% of your monthly take-home pay (after tax) on monthly mortgage payments.

The 2-out-of-five-year rule states that you must have both owned and lived in your home for a minimum of two out of the last five years before the date of sale. However, these two years don't have to be consecutive, and you don't have to live there on the date of the sale.

The BRRRR (Buy, Rehab, Rent, Refinance, Repeat) Method is a real estate investment approach that involves flipping a distressed property, renting it out and then getting a cash-out refinance on it to fund further rental property investments.

According to the 20/10 rule, you should limit your non-housing debt to twenty percent of your annual net income and keep your monthly payments for that debt to less than ten percent of the monthly net amount.

This general guideline suggests that you charge around 1% (or within 0.8-1.1%) of your property's total market value as monthly rent payments. A property valued at $200,000, for instance, would rent for $2,000 a month, or within a range of $1,600-$2,200.

There is an old adage, that the three most important words in real estate are 'Location, Location, Location'.

There are five main categories of real estate which include residential, commercial, industrial, raw land, and special use. Investing in real estate includes purchasing a home, rental property, or land. Indirect investment in real estate can be made via REITs or through pooled real estate investment.

The three types of legal descriptions you're likely to encounter include: Metes and bounds. Rectangular Survey System (also known as Public Land Survey System or government survey method) Plat method or lot and block method.

What is the vocabulary of estate? ›

While an estate refers mostly to land and a house on it, it can also refer to all of a person's possessions — and this sense of the word is often used after someone has died to refer to everything they are leaving behind.

Real estate has seven specific characteristics related to its economic impact or physical nature. They are scarcity, improvements, location, investment permanence, uniqueness, immobility, and Indestructibility. A real estate property can be classified into residential, commercial, industrial, or land.

The 1% rule of real estate investing measures the price of the investment property against the gross income it will generate. For a potential investment to pass the 1% rule, its monthly rent must be equal to or no less than 1% of the purchase price.

AAA [Additional Agent Acknowledgement]

In a down market, some real estate agents say the only real motivators for people to sell or seek property may be the three D's: death, divorce and debt.

Fee simple.

This is the most common type of interest. It is outright ownership. Even if you still owe money on your mortgage, as long as you have the right to sell the house, leave it to your heirs, and make alterations, your ownership is fee simple.

There are three common methods used to describe real estate: metes and bounds, government survey, and lot and block.

Fractional Designation: The most common form seen. A fractional designation uses rectangular surveying to correctly describe the land in sections. Metes and Bounds: This form of description uses references, such as streets and rivers to identify each point of the property (north, south, east, and west).