Real Estate Glossary

Amortization

The process of paying off a debt over time through regular payments of principal and interest.

Appraisal

An unbiased professional opinion of a home's value based on its condition, features, and recent sales of similar homes in the area.

BPO (Broker Price Opinion)

An estimate of a property's value determined by a real estate broker or agent, often used by lenders for distressed properties or quick valuations.

Cap Rate (Capitalization Rate)

A metric used to estimate the potential return on an investment property, calculated by dividing NOI by the property's value.

Closing Costs

The fees and expenses paid at the end of a real estate transaction, typically including loan origination fees, title insurance, and taxes.

CMA (Comparative Market Analysis)

A report prepared by a real estate agent that compares a property to similar homes that have recently sold, are currently active, or were pending in the same area.

Contingency

A condition in a real estate contract that must be met for the sale to proceed, such as a satisfactory home inspection or mortgage approval.

Debt-to-Income Ratio (DTI)

A financial metric used by lenders to compare a borrower's monthly debt payments to their gross monthly income.

Earnest Money

A deposit made by a buyer to show they are serious about purchasing a home, typically held in escrow until closing.

Escrow

A neutral third party that holds funds or documents during a real estate transaction until all conditions of the contract are met.

Fixed-Rate Mortgage

A home loan with an interest rate that remains the same for the entire life of the loan.

HOA (Homeowners Association)

An organization in a subdivision or planned community that makes and enforces rules for the properties and their residents.

LTV (Loan-to-Value Ratio)

The ratio of the loan amount to the appraised value of the property, expressed as a percentage.

MLS (Multiple Listing Service)

A database used by real estate agents to share information about properties for sale with other agents and the public.

NOI (Net Operating Income)

The total income generated by an investment property after subtracting all operating expenses, but before taxes and interest.

Pre-Approval

A letter from a lender stating the maximum amount they are willing to lend a borrower based on a thorough review of their finances.

Replacement Cost

The estimated cost to construct an exact duplicate of a building at current prices, using the same materials and standards.

Title Insurance

A policy that protects the buyer and lender against losses resulting from disputes over property ownership or liens.

Under Contract

A status indicating that a buyer and seller have agreed on terms and signed a contract, but the sale has not yet closed.

Zoning

Local government regulations that dictate how a property can be used, such as residential, commercial, or industrial.