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Real Estate Glossary

Real estate has its own vocabulary. Whether you're buying or selling for the first time, this glossary breaks down the terms you'll encounter throughout the process.

Adjustable-Rate Mortgage (ARM): A home loan with an interest rate that changes periodically based on a financial index. ARMs typically start with a lower rate than fixed-rate mortgages but carry the risk of increasing over time.
Amortization: The process of paying off a loan through regular scheduled payments over time. Each payment covers both principal and interest, with more going toward interest early in the loan.
Appraisal: A professional assessment of a property's market value, conducted by a licensed appraiser. Lenders require an appraisal to ensure they are not lending more than the home is worth.
As-Is: A property sold in its current condition, with no repairs or improvements made by the seller before closing. Buyers should complete thorough inspections on as-is listings.
Assessed Value: The dollar value assigned to a property by a government tax assessor for the purpose of calculating property taxes. This may differ significantly from market value.

Back-Up Offer: An offer submitted on a property that already has an accepted offer. If the primary contract falls through, the back-up offer automatically moves into first position.
Balloon Mortgage: A loan that requires a large lump-sum payment at the end of the term. Monthly payments may be lower, but the remaining balance comes due all at once.
Buyer's Agent: A licensed real estate agent who represents the buyer in a transaction, working to find suitable properties, negotiate terms, and protect the buyer's interests throughout the process.
Buyer's Market: A market condition where there are more homes for sale than buyers, giving buyers more negotiating power on price and terms.

Clear Title: A property title with no liens, claims, or legal questions about ownership. Clear title is required for a property to be sold.
Closing: The final step in a real estate transaction where ownership is legally transferred from seller to buyer. Both parties sign documents, funds are exchanged, and keys are handed over.
Closing Costs: Fees and expenses paid at closing beyond the purchase price. These typically include loan origination fees, title insurance, appraisal, attorney fees, and prepaid taxes and insurance — usually 2–5% of the loan amount.
Commission: The fee paid to real estate agents for their services, typically a percentage of the sale price. In Arkansas, commissions are negotiable and are usually paid by the seller.
Comparative Market Analysis (CMA): A report prepared by a REALTOR® that analyzes recently sold, active, and expired listings to estimate a property's current market value. Used to price homes for sale or to craft competitive offers.
Contingency: A condition that must be met before a real estate contract becomes binding. Common contingencies include financing, inspection, and appraisal.
Conventional Loan: A mortgage not insured or guaranteed by the federal government, typically requiring a higher credit score and down payment than FHA or VA loans.
Counter Offer: A response to an offer that modifies one or more terms — such as price, closing date, or repairs — rather than accepting or rejecting the original offer outright.
Credit Score: A numerical rating that reflects a borrower's creditworthiness. Most conventional lenders prefer a score of 620 or higher; FHA loans may allow scores as low as 580.

Days on Market (DOM): The number of days a property has been listed for sale. A high DOM can indicate that a home is overpriced or has other challenges.
Deed: A legal document that transfers ownership of real property from one party to another. The deed is recorded with the county after closing.
Deed of Trust: A legal document used in some states (including Arkansas) in place of a mortgage, which conveys title to a trustee as security for the loan.
Default: Failure to meet the legal obligations of a mortgage, typically by missing payments. Default can lead to foreclosure.
Disclosure: A seller's written statement of known material defects or issues with a property. Arkansas law requires sellers to disclose known defects that may affect value or desirability.
Down Payment: The portion of the purchase price paid by the buyer upfront, not financed by the lender. Conventional loans often require 5–20%; FHA requires as little as 3.5%; VA and USDA loans may require zero down.
Dual Agency: When a single agent or brokerage represents both the buyer and seller in the same transaction. This is legal in Arkansas but requires written consent from both parties.
Due Diligence: The buyer's process of investigating a property before closing — including inspections, title review, flood zone checks, and reviewing disclosures.

Earnest Money: A good-faith deposit made by the buyer when submitting an offer to show serious intent to purchase. Typically 1–2% of the purchase price; it is applied toward closing costs or the down payment at closing.
Easement: A legal right for a third party to use a portion of a property for a specific purpose, such as a utility company running lines across the land or a neighbor accessing a shared driveway.
Equity: The difference between a property's current market value and the remaining balance on the mortgage. Equity grows as the home appreciates and as the loan is paid down.
Escrow: A neutral third party that holds funds and documents during a real estate transaction until all conditions are met. Escrow is also used to collect property taxes and insurance as part of monthly mortgage payments.

FHA Loan: A mortgage insured by the Federal Housing Administration, designed for buyers with lower credit scores or smaller down payments. Requires as little as 3.5% down with a 580+ credit score.
Fixed-Rate Mortgage: A home loan where the interest rate remains constant for the entire life of the loan, resulting in predictable monthly payments. Common terms are 15 and 30 years.
Flood Insurance: Insurance required for properties in designated flood zones (Special Flood Hazard Areas). It is separate from standard homeowner's insurance and often required by lenders.
Foreclosure: The legal process by which a lender takes possession of a property after the borrower fails to make mortgage payments. Foreclosed homes are often sold at auction or listed as bank-owned (REO) properties.
For Sale By Owner (FSBO): A property listed directly by the owner without representation from a real estate agent. Buyers working with an agent can still submit offers on FSBO properties.

General Warranty Deed: The most comprehensive form of deed, in which the seller guarantees the title against all claims, even those that arose before the seller owned the property.
Good Faith Estimate (GFE): A document previously required by lenders that estimates loan costs. Now replaced by the Loan Estimate form under current federal lending regulations.

Home Inspection: A professional examination of a home's condition, including its structure, systems, and components. A licensed inspector provides a written report of findings, which buyers use to negotiate repairs or credits.
Homeowner's Association (HOA): An organization in a planned community that sets and enforces rules and collects dues for shared maintenance. HOA membership and fees should be reviewed before purchasing.
Homeowner's Insurance: Insurance that protects against financial loss from damage to a home and its contents. Lenders require homeowner's insurance to be in place before closing.
HUD-1 Settlement Statement: A document that itemizes all charges and credits to the buyer and seller in a real estate transaction. It has largely been replaced by the Closing Disclosure for most transactions.

Inspection Contingency: A clause in a purchase contract giving the buyer the right to have the property inspected and to negotiate repairs, request a price reduction, or walk away based on the results.
Interest Rate: The percentage charged by a lender for borrowing money, expressed annually. Even a small difference in interest rate can significantly impact the total cost of a loan over time.

Lien: A legal claim against a property, often for unpaid debts such as taxes, mortgages, or contractor work. Liens must be resolved before a clear title can be transferred.
Listing Agent: The real estate agent who represents the seller and markets the property for sale. Also called the seller's agent.
Listing Agreement: A contract between a seller and a real estate broker authorizing the broker to market and sell the property under specified terms, including price and commission.
Loan-to-Value Ratio (LTV): The ratio of the loan amount to the appraised value of the property, expressed as a percentage. A higher LTV represents more risk to the lender and may require private mortgage insurance (PMI).
Lock-In Rate: A lender's guarantee to hold a specific interest rate for a set period, typically 30–60 days, while the loan is being processed.

Market Value: The price a willing buyer and a willing seller would agree on in an open market, with neither under pressure to act. This is what appraisers and CMAs attempt to determine.
MLS (Multiple Listing Service): A database used by real estate agents to share property listings with other agents. MLS listings reach the widest pool of buyers and are the primary tool for marketing homes for sale.
Mortgage: A loan used to finance the purchase of real property, with the property itself serving as collateral. The borrower agrees to repay the loan with interest over a set term.
Multiple Offers: A situation where more than one buyer submits an offer on the same property at the same time, often resulting in offers above asking price or with fewer contingencies.

Net Proceeds: The amount a seller receives after all closing costs, commissions, and outstanding loan balances are deducted from the sale price.

Offer: A formal proposal to purchase a property at a specific price and under specific terms. An offer becomes a contract once accepted by the seller.
Open House: A scheduled time when a listed property is open for buyers to tour without an appointment. Typically held on weekends and marketed to the public.
Origination Fee: A fee charged by a lender to process a new loan application, typically 0.5–1% of the loan amount.

PITI: An acronym for Principal, Interest, Taxes, and Insurance — the four components that make up a typical monthly mortgage payment.
Pre-Approval: A lender's conditional commitment to loan a specific amount based on a review of the buyer's credit, income, and financial documents. Pre-approval strengthens offers and is expected by most sellers before accepting.
Pre-Qualification: An informal estimate of how much a buyer may be able to borrow, based on self-reported financial information. Less thorough than pre-approval and not as compelling to sellers.
Private Mortgage Insurance (PMI): Insurance required by lenders when a buyer puts down less than 20% on a conventional loan. It protects the lender if the borrower defaults and is typically removed once the LTV reaches 80%.
Purchase Agreement: The legally binding contract between buyer and seller that outlines the terms of a real estate sale, including price, contingencies, and closing date.

REALTOR®: A licensed real estate agent who is a member of the National Association of REALTORS® and is bound by its Code of Ethics. Not all real estate agents are REALTORS®.
REO (Real Estate Owned): A property that has been foreclosed on and is now owned by the lender. REO properties are typically sold as-is and can represent value opportunities.

Seller's Market: A market condition where demand for homes exceeds supply, giving sellers more leverage to negotiate price and terms. Often results in multiple offers and homes selling above asking price.
Short Sale: A sale in which the seller's lender agrees to accept less than the full mortgage balance owed. Short sales require lender approval and typically take longer to close.
Survey: A professional measurement of a property's boundaries, easements, and improvements. A survey confirms lot lines and can reveal encroachments or title issues.

Title: Legal ownership of a piece of real property. A clear title is required to sell or refinance a home.
Title Insurance: Insurance that protects the buyer and/or lender against loss from title defects, liens, or ownership disputes that were not discovered before closing. There are two types: owner's and lender's.
Title Search: A review of public records to verify a property's legal ownership and identify any claims, liens, or encumbrances attached to it.

Under Contract: A property with an accepted offer where both buyer and seller have signed a purchase agreement but closing has not yet occurred. The home is typically removed from active MLS listings.
Underwriting: The lender's process of verifying a borrower's financial information and evaluating the risk of approving a mortgage loan. Underwriting is the final step before loan approval.
USDA Loan: A government-backed mortgage for buyers in eligible rural areas, offering 100% financing with no down payment required. Much of the River Valley qualifies — ask Jade about eligibility for your target area.

VA Loan: A mortgage guaranteed by the U.S. Department of Veterans Affairs, available to eligible veterans, active-duty service members, and surviving spouses. VA loans require no down payment and no PMI.

Walk-Through: A final inspection of the property by the buyer, typically conducted 24–48 hours before closing, to confirm the home's condition and that any agreed-upon repairs have been made.
Warranty Deed: A deed in which the seller guarantees that they hold clear title to the property and have the right to sell it.

Zoning: Local government regulations that control how land in a specific area can be used — residential, commercial, agricultural, industrial, etc. Zoning affects what you can build and how a property can be used.

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