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The Language of Real Estate

Sanibel Real Estate

Puzzled by real estate terms?

The real estate world has it's own set of terms that apply to buying and selling properties. Understanding the language of real estate is a must for any buyer or seller. The following list of commonly used terms by Realtors, Lenders and Inspectors are important to understand.


Amenity: A feature of a property that is attractive to the owner or buyer that enhances the appeal, but is not vital to the functionality of the property. Amenities can include a favorable location, view, as well as community lifestyle features (a club house, swimming pool, guard gate) etc.

Appraisal: An estimation of the market value (appraised value) of a property by a licensed appraiser based on comparable recent sales (usually the last 6 to 12 months) of nearby or similar properties. In some areas, where homes are very unique these comparable sales may not be in the same "neighborhood".

Appreciation: The increase in the value of the property due to upgrades made to the home, or changes in market conditions.

Assessed Value: Value of a property by the public tax assessment office used to determine the taxation amount.

Assessment: For taxing purposes, this term means placing a value on a piece of property. An assessment also can refer to a fee levy on a property for a needed repair or addition such as a sewer assessment, or a condo assessment for new pavers.

Assumable Mortgage: An existing mortgage that can be transferred from the seller to the buyer. The buyer will assume the mortgage.


Backup Offer: An offer on a properties that is under contract with contingencies or conditions that need to be met or achieved before the sale is final. Should the contract fall apart, a backup offer can be negotiated.

Broker: Individual who charges a fee or commission to bring buyer and seller together in the contract negotiation process.

Building Code: Regulations that apply to construction, coverage, or design elements that are locally determined. Most building codes are designed for safety while some are aesthetically determined.


Clear Title: This title is free of liens and there are no legal questions as to who owns the property.

Closing: The time upon which both buyer and seller have signed all the applicable documents and all associated costs of the sale have been paid. Also known as the Settlement.

Closing Costs: These extra expenses are not included in the agreed upon sale price of the property. They are generated by the transfer of ownership for the property sold. They can include taxes, charges for surveys, title insurance, attorney's fees. Closing costs can change from state to state and your Realtor can provide an estimate of any closing costs that will be incurred by both buyer and seller.

Closing Statement -See HUD Statement

CMA - See Comparative Market Analysis

Commission: Usually a percentage of the purchase price of the property, this fee is charged by the Broker, Agent or Realtor in exchange for "brokering" the real estate transaction.

Comparables: These are recently sold properties of similar size, amenities and location that are used to help determine the best estimate of a property value during the appraisal process. Also known as "comparable properties".

Comparative Market Analysis (CMA): Used to determine the fair market value of a property, this analysis compares the sales prices of recently sold similar properties with respect to size, amenities, age, and location to estimate the home's value. CMAs are often done to determine the asking price of a new listing based on current market conditions.

Commitment Letter Also known as a loan commitment letter, this is a formal statement from the lender detailing the lending terms that they will extend to the home buyer.

Common Area Assessments Fee to each property owner in a condominium or planned development that is charged to each owner to help buffer the costs for common area improvements, repairs or maintaining the grounds or management in general.

Common Areas Areas of a planned community or condominium complex that are used by each property owner. They can be land, amenities, structures, parking, driveways or deeded access areas.

Condominium A complex with several individual unit owners who have interest in the common areas of the property.

Contingent Offer: This offer is accepted by the seller, but there are specific conditions that must be met in order for the sale to proceed to close. Contingencies can include obtaining a locked in loan interest rate, the successful sale of another property, an acceptable appraisal, etc.

Condominium Hotel: Also referred to as a "Condotel" this complex functions like a short-term stay hotel, however the units are owned by private individuals. The property often has on site rental office, guest registration area, daily cleaning services etc.

Construction Loan: This loan (often at a higher interest rate), is a short-term loan designed to finance the cost of the construction project. During this time, the lender pays the builder based on the progress of the construction.

Contingency: Any condition in the contract that must be met before it becomes a legally binding document. Contingencies can include viewing in person, favorable financing terms, the sale of a different property, or acceptable home inspection.


Deed: The legal document conveying title to a property.

Deed-in-lieu: The property deed is surrendered to the lender (mortgage holder) by the owner (mortgagee) to avoid foreclosure.


A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan. See earnest money deposit.

Depreciation: A decline in the market value of property; the opposite condition is a rise in market value known as appreciation.

Document Stamps aka Doc Stamps: This is a tax paid to the Clerk of Court when a document (warranty deed or quit claim deed) is recorded to transfer ownership in Florida real property.

Down Payment: Usually between 5% and 20% of the purchase price is paid prior to closing as cash. This is required often by the bank as insurance that the loan will be paid, or sometimes by the owner to secure that the buyer is serious about their offer.


Earnest Money Deposit: A deposit large enough made by the potential buyer to show that they are serious (earnest) about purchasing the property.

Easement: A right of way granting individuals other than the property owner permission to access, or go over the property.

Eminent Domain: This allows the government to obtain an individual's personal property for public use at fair market value.

Escrow: This refers to the amount of money held by a neutral third party prior to closing. These funds are distributed at closing when all the conditions of the sale have been met.

Equity: A measure of the difference between the fair market value and the amount still owed on the property mortgage. This is a measure of the owners financial interest in the property.

Escrow: These are the documents, deposits or other valuables held by a third party to be distributed when a condition is met. The escrow agent will disburse these funds, documents or items at the property closing.


Fair Market Value: This is a combination of the highest price and buyer would be willing to pay and the lowest price the seller is willing to take, this is the fair market value.

Federal Housing Administration: This is a government agency (FHA) that oversees that loans are designed for low to moderate income earners to have the ability to secure a loan.

Fee Simple: This is the greatest interest an individual can have in a property.

Flood Insurance: A required insurance for properties in federally designated flood areas, this helps compensate for flood caused damage. Visit FEMA to learn more about FIRM (Flood Insurance Rate Maps).

Foreclosure: This is the legal process when the lender can force the sale of a property usually at a public auction when the borrower fails to pay their mortgage. The proceeds of the foreclosure sale are applied to the debt held by the lender.


Good Faith Estimate aka Loan Estimate: This is a form that is can be prepared by the lender to help the borrower understand what amount of money they will owe at the closing table.


Hazard Insurance: This insurance helps to cover damage to a property caused by wind, fire and other hazards. It does not compensate for flood damage.

Home Inspection: See Inspection

Homeowners Association aka HOA: Within a neighborhood, community or complex this is the management organization that creates rules, enforces restrictions and assesses owners with fees to cover maintaining the community. The organization can be ruled by elected property owners within the community or an outside service company.

HUD-1 statement: This document is provided by the Department of Housing and Urban Development and it is a standardized form used at closing (also referred to as the settlement or closing statement) that itemizes all the closing funds required. The resulting line by line breakdown of the HUD-1 total the proceeds do to the seller at closing and the payment due from the buyer at closing.


Inspection: Performed by a licensed qualified professional, this is a through examination of a property and all the systems within creating a report that addresses areas that need repair or attention.

Investment Property: A property that is not occupied full time by the owner.


Joint Tenancy: Co-ownership of a property that gives each individual (tenant) equal rights to the property and the right of survivorship should one tenant pass.

Jumbo Mortgage: A loan that exceeds the normal or conforming loan limit for a lender. A jumbo mortgage is used for luxury home purchases.


Key Rate: Determined by the Federal Government, this interest rate determines the cost (interest rate) to borrow money which affects all types of loans including property loans.


Loan-to-value: This value estimates the risk a lender takes on a loan and it is calculated by dividing the mortgage by the appraised value.


Mortgage: A legal document indicating that the payment of the debt to the mortgagor will be paid by the mortgagee. During the mortgage period, the property in question is the security on the debt owed to the lender by the borrower.

Multiple Listing Service: This data base covers an specific area providing a platform for Realtors to list and market homes for sale.


Net Proceeds: The amount of money received by the seller at closing in excess of the closing costs.


Open House: Event when the listing agent or open house coordinator showcases the home to potential buyers.

Owner Financing: The sale of a property in which the seller agrees to provide all or part of the financing requested by the buyer.


Pending Sale: This indicates that a property is due to close without any contingencies.

Pre-approval Letter: A letter from a lender indicating that they are willing to loan a specific amount of money to the borrower to purchase a property. This is not a loan approval guarantee.

Pre-qualification: The determination of how much money the potential property buyer might be allowed to barrow before they apply for a loan. This process often results in a "pre-approval letter" from the lender.

Public Auction: In real estate this a pre-advertised public event in which a property is sold by auction to the highest bidder usually in a public location. The auction is often triggered by mortgage default and proceeds are used to repay the mortgagor/lender.

Purchase and Sale Agreement: This is a contract signed by the seller and the buyer with all the agreed upon terms and conditions for the property sale.


Quitclaim Deed: This deed transfers ownership of a property without any validation of true ownership. Most often used to transfer a property within a family.


Real Estate Owned Property: Often referred to as REO these are properties that are owned by the lender by loan defaults.

Real Estate Agent: An individual who is licensed to negotiate the transaction and sale of real estate on behalf of the seller (property owner).

Real Property: Any parcel of land and the man made structures or natural resources found upon the property such as crops, oil, trees, buildings, other structures etc.

Realtor®: The trademark title for any real estate broker or agent that has an active membership in a real estate board that is affiliated with the National Association of Realtors.

Right of First Refusal: An agreement between the property owner and another interested buyer or renter the first chance to purchase or rent the property before it is offered to others for sale or rent.

Right of Survivorship: The right or the survivor in a joint tenancy agreement to obtain the deceased party's interest in the property.


Sale-leaseback: The buyer acquires the deed to the property and allows the seller to lease back the sold property for an agreed upon rate and timeframe.

Second Mortgage: This mortgage holds the second lien position to the first mortgage in the event of a default by the borrower.

Seller Disclosure: A form completed by the property owner that acknowledges any defect history that they are aware of as the seller.

Settlement: See "Closing"

Settlement Sheet: See "HUD-1 Statement".

Subdivision: A tract of land that is divided into individual lots for the construction of single family residences to be sold or leased.

Survey: A map or drawing prepared by a licensed surveyor that illustrates the exact legal property boundaries. Other features will be shown including physical structures, easements, or improvements.

Sweat Equity: A term that refers to improvements to a property by labor efforts not paid in cash.


Title: Ownership of the property recognized by law.

Title Company: A company that insures clear title to a property by examining title history and other liens.

Title Insurance: Protects both mortgagor with a lender's policy or the buyer with an owner's policy from losses that may occur over the dispute of property ownership.

Title Search: Usually conducted by the title company, this search looks into title records to ensure that the property seller legally owns the property and it is free from any claims or liens.

Transfer Tax: This tax is triggered when a property passes from one owner to another. This can be a State or Local tax.

Trustee: A fiduciary (an individual) trusted to hold or control a property for the benefit of another individual(s).


Under Contract: The seller has accepted a buyer's offer, but the property has not closed yet. The property may be Pending or Under Contract with Contingencies.

Underwriting: This process determines the risk to the lender by evaluating the borrower's loan application to analyze the buyer's credit and the value of the property in question.

Unsecured Loan: Any loan that is not backed by collateral.


VA Loan: A loan made by private lenders and backed by the government designed specifically for veterans and their spouses. VA stands for Veteran's Administration. For more loan information visit the U.S. Government's Consumer Financial Protection Bureau.


Walkthrough: Conducted shortly before the home closes, this is a final review of the property prior to the sale. It is a time to confirm completion of agreed upon repairs and or items to remain with the property after closing.


Zestimate: Coined by the real estate portal Zillow, this is an algorithm designed to estimate property value. The zestimate is a relative guide. Determining the most accurate value of a property requires an onsite visit and local expertise. The Zestimate is far more reliable in a commodity market such as a large neighborhood of similar homes or condos. Learn more about Zillow Zestimate and how it is derived.


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