Real estate glossary: plain-English definitions

Real estate has its own language. Here are the words you will hear when you buy, sell or finance a home, each explained in one or two short sentences.

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Buying, selling and closing terms

Appraisal: A licensed appraiser's opinion of what a home is worth. Lenders order one to make sure the home is worth the loan.
APR: Annual percentage rate. The yearly cost of a loan, including the interest rate and certain fees. Use it to compare loans from different lenders.
Buyer agreement: A written contract between a home buyer and their agent. It says what the agent will do and how the agent gets paid. Learn more.
Buyer's market: A market with more homes for sale than buyers. Homes sit longer and buyers have more room to negotiate. Learn more.
Cap: For agents: the most they pay their brokerage in a year. After an agent hits the cap, they keep more of each commission for the rest of the year. Learn more.
Closing: The last step of a home sale. Papers are signed, money moves and the buyer gets the keys.
Closing costs: Fees paid to finish a home sale, like lender, title and recording fees, plus prepaid taxes and insurance. Learn more.
Closing Disclosure: A form from your lender showing your final loan terms and closing costs. You must get it at least three business days before closing.
Commission split: How an agent's commission is shared with their brokerage, like 80/20. At a flat-fee brokerage, there is no split. Learn more.
Comparative market analysis (CMA): A report from an agent that compares your home with similar homes that sold nearby to find a price range. Learn more.
Contingency: A condition in a purchase contract, like an inspection or loan approval. If it is not met, the buyer can usually back out and keep their earnest money. Learn more.
Conventional loan: A mortgage that is not backed by a government agency. It usually needs a stronger credit score than an FHA loan. Learn more.
Credit score: A number that shows how well you have paid back debt. A higher score can get you a lower mortgage rate. Learn more.
Days on market: How long a home has been listed for sale. A high number can mean the price is too high.
Down payment assistance: Grants or low-cost loans from states, cities or nonprofits that help buyers pay their down payment or closing costs. Learn more.
Earnest money: A deposit a buyer makes when their offer is accepted. It is held by a third party and counts toward the purchase at closing. Learn more.
Escrow: A neutral third party that holds money and papers until a sale closes. Also an account your lender uses to pay your taxes and insurance.
FHA loan: A mortgage backed by the Federal Housing Administration. It is often used by buyers with smaller down payments or lower credit scores. Learn more.
Flat-fee brokerage: A brokerage where agents pay a set fee per closing instead of splitting their commission. AXEN Realty is one. Learn more.
HOA: Homeowners association. A group that runs a neighborhood or condo building and charges owners dues.
Home inspection: A check of a home's roof, structure, plumbing, electrical and heating and cooling by a trained inspector, usually paid for by the buyer. Learn more.
Listing agreement: A contract between a home seller and their agent. It sets the list price, how long the listing lasts and how the agent is paid. Learn more.
Loan Estimate: A three-page form a lender must give you within three business days of applying. It shows your rate, payment and closing costs.
Managing broker: The licensed broker who supervises agents in a state. Every AXEN agent works under one. Learn more.
Mortgage insurance: Insurance that protects the lender, not you. Many loans require it when the down payment is small.
Pre-approval: A lender's written offer to lend up to a certain amount after checking your income, debts and credit. Learn more.
Pre-qualification: A quick estimate of what you might borrow, based on what you tell a lender. It is not a loan offer. Learn more.
Rate buydown: Paying extra, often by the seller, to lower the buyer's interest rate for a few years or for the whole loan. Learn more.
Revenue share: For agents: money a brokerage pays an agent when agents they brought to the company close deals. Learn more.
Seller concessions: Money a seller agrees to pay toward the buyer's closing costs or a rate buydown. Learn more.
Seller's market: A market with more buyers than homes for sale. Homes sell fast, often near or above list price. Learn more.
Title insurance: Insurance that protects the owner or lender if someone later claims a right to the property.
Transfer tax: A tax some states and counties charge when a home changes owners. Some charge none. Learn more.
Underwriting: The lender's final check of your income, assets, credit and the home before approving your loan. Learn more.
USDA loan: A mortgage backed by the U.S. Department of Agriculture for eligible homes in rural and some suburban areas.
VA loan: A mortgage backed by the Department of Veterans Affairs for eligible service members, veterans and some spouses.

Keep learning

Ready for the next step? Read the home buying guide, the home selling guide or the home financing guide, or browse all guides.

Straight answers

Glossary questions

What is the difference between pre-qualified and pre-approved?

Pre-qualification is a quick estimate based on what you tell a lender. Pre-approval means the lender checked your income, debts and credit and made a written offer to lend.

What is the difference between APR and interest rate?

The interest rate is the cost of borrowing the money. The APR adds certain loan fees, so it is the better number for comparing lenders.

What is the difference between a real estate agent and a managing broker?

A managing broker holds a higher license and supervises agents. Every agent works under a broker.