acreA measure of land; equals 43,590 square feet.

adjustable-rate mortgage (ARM)A loan on which monthly payments will increase or decrease over time based on changes in the ARM’s interest rate index. ARM payments typically are adjusted every six months or once a year. Common indexes to which ARMs are tied include one-year T-notes and six-month T-bills.

amortizationThe schedule of repayment of a mortgage over its term, usually monthly.

annual percentage rate (APR)The true rate of interest you pay after compounding.

appraisalA professional valuation of a piece of real property.

arbitrationA form of nonjudicial dispute resolution. Its decisions are binding on the parties.

as-isA term used to denote that a piece of property is to be sold in its present condition, regardless of what the buyer may discover in inspections. In some extreme cases, a seller may agree to reduce the agreed contract price if unusually extreme damages to the home are found during the inspection.

assessment1.) A one-time expense required of condo owners by their homeowners’ association, usually to cover a sudden large expense for the condo complex. 2.) The value the local taxing authority assigns to real estate, as a basis for establishing its tax bill.

balloon paymentThe final payment on a loan that is only partly repaid by the time it reaches its final due date. The balloon equals the remaining outstanding balance at that point.

bankruptcyLegal processes under federal law to resolve indebtedness.

blogShort for weblog,a blog is like a personal diary for a business.

buydownThe process of paying points to a mortgage lender, to get a lower interest rate charged to the mortgage.

capital gainThe increase in value of your property made during the period you own it.

change orderA change from original plans made during construction by the contractor.

closingThe final point in a home purchase, when you legally take title to a property.

comparative market analysis (CMA)A survey of attributes and selling prices of comparable houses either on the market or recently sold. A CMA helps determine the correct pricing strategy for a seller’s property and a buyer’s purchase.

condominiumA type of residential property. Also, a legal form of ownership in which you own everything within your residence but have shared ownership of all common areas, such as grounds, pools, and other amenities.

constructive knowledgeWhen it is deemed someone should have known about a situation or defect due to his professional expertise.

contingencyA condition to your offer that allows you to cancel a contract within a specific period of time if you cannot be satisfied under the conditions of the contingency (for example, an inspection contingency or a loan contingency).

conventional loanA mortgage with an initial principal amount not exceeding $417,000.

conveyanceEither 1.) the transfer of title, or 2.) the document, such as a deed, by which title is officially transferred.

creditbackAn amount of money that the seller pays back to the buyer at the time of the purchase closing.

curb appealThe attraction—or lack thereof—that a home shows visitors as they first arrive at the home.

deedA legal document that formally conveys ownership of property from seller to buyer.

depreciationAn accounting process by which the paper value of real property is reduced. This benefits an owner from an income tax point of view, even though the property may actually be appreciating.

days on market (DOM)Represents the time, in days, that a piece of real property has been on the market.

dry rotA fungal form of damage to wood. Contrary to its name, it is caused by the exposure of wood to moisture.

duplexA residential building that has two separate residential units. A duplex is often used as an investment property.

earnest moneyA good-faith deposit that the buyer pays at the start of the purchase transaction. It accompanies the initial offer and becomes part of the buyer’s overall down payment.

easementA legal transfer of a right to a nonowner of property that affects the use of the property. Easements are granted in perpetuity (for example, a right of passage across a piece of land given by the owner to another person).

equityThe part of a property’s value that is not part of the loans outstanding on the property. Also referred to as owner’s equity.

Errors and Omissions (E&O) insuranceCovers a Realtor’s liability for errors of negligence in his practice while representing a client.

Federal Emergency Management Administration (FEMA)The federal government agency that oversees disaster emergency assistance.

FICO scoreCredit score. Often used to help determine eligibility for a mortgage.

fiduciaryOne who acts on behalf of another in any matter that requires a high level of trust. If violated by the one receiving that trust, it is dealt with harshly by the courts.

fixtureAny part of a structure that is, by its form of attachment, effectively an inseparable part of the structure. This may include built-in cabinets and appliances.

flood zoneA geographical area determined by the U.S. Army Corps of Engineers to be likely to flood at least once in a hundred-year period. Homeowners who have a mortgage in these areas are required to obtain flood insurance.

foreclosureThe process by which a lender takes possession and title of real property from its owner, usually due to nonpayment of a mortgage on the property.

FSBOFor sale by owner. The home is for sale by the owner, without an agent representing the owner.

GI loanA federally guaranteed mortgage for military veterans, also known as a VA loan.

gift letterA letter from the donor of a gift of money that is used to buy a home. It certifies that the funds truly are a gift and that the buyer has no obligation to repay them at a later date. The buyer provides this to a bank as part of the mortgage application package when down payment funds include a gift.

hazard insuranceCompensates for property damage from specified hazards such as fire and wind.

homeowners’ association (HOA)The group of all owners in a residential complex that enforces owners’ covenants. Although it is a possibility in any group of homes, it is most often found in condominiums and townhomes.

implied warrantyPart of the law in many states to protect buyers of new construction. It generally holds that, for a specific period of time after construction, the original owner has a right to expect no defects from poor construction work.

impoundAn account established by the mortgage lender to hold funds to cover property taxes and homeowner’s insurance premiums.

installment sale/purchaseTransfer of property over a period of time, during which the buyer makes installment payments to the seller until the full agreed price is paid. Interest is charged to the buyer, and the legal title passes only when the seller receives final payment.

institutional lenderA traditional lender, such as a bank.

jumbo loanA mortgage loan of more than $417,000. In some high-price areas, this can be as much as any loan over $724,000.

lienA legal claim against the title to a piece of real property. Also referred to as a “cloud” on the title, something that calls its legitimacy into doubt.

liquidated damagesA contractually agreed-upon amount that must be paid to the seller if the buyer breaches the contract. This agreed amount avoids litigation and related expenses.

loan assumptionThe situation when a buyer, as part of the purchase, agrees to take over the existing financing on the property. Some loans are assumable; others are not.

market valueThe current value of real estate that a buyer is willing to pay and a seller is willing to accept.

mediationA form of nonjudicial dispute resolution. Its decisions are not binding on the parties.

Megan’s LawA series of laws enacted in most states that provides a sexual offender database for buyers to see if an offender lives near their home.

moldA living organism that, in a very few circumstances, can have serious harmful effects to people’s health. Mold is usually caused by moisture in a confined area.

mortgage1.) The term for the lien placed upon a piece of property by a lender to secure its loan on the property. 2.) A loan used to finance the purchase of real property.

mortgage brokerAn individual who arranges mortgages for buyers by obtaining information and then presenting it to as many banks as he feels appropriate to get the best loan possible.

Multiple Listing Service (MLS)The place where Realtors usually list their properties for sale.

National Flood Insurance Program (NFIP)Special federally backed flood insurance program. This program is required of homes located in Army Corps of Engineers-designated flood zones as long as they have mortgages from FDIC-insured lenders.

notice of default (NOD)The first legal recorded document when a homeowner breaches the terms of his mortgage. The breach is usually failure to make timely payments of the mortgage.

open houseWhen a property is open to the public for on-site viewing, with or without a Realtor.

per annumLiterally, “per year.” The most common method of calculating interest on a loan.

PITIPrincipal, interest, taxes, and insurance, forming the basis for monthly mortgage payments.

pointA loan fee equal to 1 percent of the principal amount of the loan.

preapprovalThe process by which a lender fully analyzes a buyer’s financial information and approves a mortgage. It may be conditioned on satisfactory title and appraisal reports.

prequalificationThe process by which a lender briefly reviews a buyer’s financial information to consider the likelihood of eligibility for a loan upon further in-depth analysis. This is not as good as a full approval.

principalThe amount borrowed when taking out a loan.

private mortgage insurance (PMI)Insurance purchased by the buyer on the principal loan amount, guaranteeing repayment. Usually required on higher-risk mortgages.

prorationThe process by which real estate taxes and interest on a loan, for a brief period at closing, are divided between the buyer and seller of a home.

real estate owned (REO)Bank parlance for foreclosed property owned by the bank.

Real Estate Settlement Procedures Act (RESPA) statementA precise breakdown of closing costs for both sellers and buyers.

real propertyA possession that consists of real estate and any fixtures attached thereto (such as buildings), as distinct from personal property.

RealtorA real estate sales professional licensed by her state to list and sell real property, who is also a member of the state or National Association of Realtors.

recordationThe process of legally recording documents related to a home, such as a mortgage, a deed, liens, and easements. Usually performed by a county official known as the county recorder.

relocationThe process by which an individual is moved from one location to another by her employer. The company often provides relocation assistance to ease the move. May sometimes refer to a voluntary move that is not job related.

reverse mortgageA loan that is repaid on the sale of the property from the equity in the home. This loan is more common for elderly or retired homeowners living on a fixed income who have a lot of equity built up in their home.

secondary mortgage marketA market created by lenders selling their mortgage loans to other lenders to replenish lendable cash.

seller carrybackOccurs when the seller agrees to “carry back” a mortgage on the property he has just sold. The mortgage can be for the entire amount financed or just a portion of it. Principal amount, interest rate, and term of the loan are negotiated between the buyer and the seller.

setbackThe distance from your lot’s boundaries that local ordinances require you to place your walls when building or remodeling your home.

short saleThe sale of real property when the seller’s price is less than the outstanding loan balances on the property. The bank holding the mortgage must agree to the sales price.

specific performanceA legal process by which one party to a contract can force the other party to perform under the contract. Most commonly used by the buyer in home buying when the seller breaches and refuses to complete the sale.

specific warranty of constructionMeans that, by law, in the states that have it, a buyer of a new home has a statutorily defined period of time in which the builder/ seller must remedy any construction defects.

tenants-in-commonA form of ownership in which all owners share a common ownership of the property but individually own a specific percentage of the whole. Each individual also gets his own financing.

termThe length of time a loan is made for. Also called tenor.

title insuranceInsurance to protect against claims made against legal title to a specific piece of real property referred to in the policy.

topographyThe physical details of land—hilly, flat, sloping, and so on.

toxic moldCertain types of mold that can cause serious health problems.

Uniform Commercial Code (UCC)A legal code that deals mostly with non-real estate issues. The main real property exceptions to this are lenders’ security interests in items of value that are removable from real estate, such as timber, crops, or extractive minerals.

VA loanA federally guaranteed mortgage for military veterans; also known as a GI loan.

vestingConveying ownership.

virtual tourA “tour” of a home by video or photos on a CD or website.

walkthroughBuyer verification of a property’s condition immediately before closing.

warrantyA form of guarantee of no defects in an individual item of merchandise or an object containing that merchandise. In certain formats, it may apply to a home or its components, systems, and appliances.