Real Estate Terms Glossary

21E Certificate – certifies that property is free from contamination

203(b) – FHA financing program for anyone purchasing a primary 1-4 family, owner-occupied residence

1031 Exchange – way to defer capital gains tax; property owner must re-invest profits from the sale of an investment property

into another investment property within 6 months

6D Certificate- A form of certification that a Massachusetts condominium unit owner has paid all condominium or common area fees, or expenses assessed against the condominium unit as of the date of the certificate.

ABAs – Affiliated Business Arrangements; service providers, such as mortgage brokers and real estate attorneys, package their

services together as an offering to their clients

ACT- Active

Active income – income generated from active activities, such as a salary; cannot deduct depreciation from this income unless you

are a real estate professional

Adjustments – the proration of costs and income (taxes, rents, HOA fees, etc.) between buyer and seller at closing of title (passing

of papers)

Agency – a contract by which someone represents another in a transaction or area of business

Amortization – the payment of a debt in equal installments; each payment is the same, and pays down the debt over time, with a

portion of each payment going to the principal and interest on the loan

Anchor tenants – major tenants which draw consumers to a shopping center, such as department stores

Appraisal – an estimate of value

Appraiser – professionals with an appraisal license who estimate what buyers will pay for real estate

Arm’s length transaction – an open and willing sale without cooperation or coordination between the buyer and seller

Asbestos – hazardous material that was used as an insulation material and fire retardant; carcinogenic; most often seen in homes

with popcorn ceilings; most dangerous in a friable state

Assessed value – also known as tax value; value given to realty by assessor’s office for property taxation purposes

Betterments – improvements adding to value of realty, done by local government and paid for by gainers of value; sidewalks,

streets, etc. Results in a special assessment

Binder – deposit or earnest money given as evidence of good faith by buyer to secure property until sale is consummated; it can

also refer to a temporary memorandum outline a real estate deal, similar to a letter of intent.

Blanket mortgage – a single mortgage covering more than one piece of real estate as collateral for a loan; usually includes partial

release clause

BOM - Back on Market

Bridge loan – short-term loans designed to bridge the gap in cash flow, such as between development projects

Brownfields – lands previously used for commercial purposes and are contaminated by hazardous waste or pollution

Capital gains – tax paid on profits from the sale of an investment property; can be short term (property held for <12months) or

long term (property held for > 12months)

Certificate of occupancy – shows that a building has been inspected and found to satisfy building codes

Chattel – an article of personal property

Closing costs – costs to transfer real estate

Closing Disclosure – a written accounting of funds to seller and buyer at passing of papers.

CMA – Comparative (or competitive) Market Analysis; used to determine listing price; typically based on price per square foot; a

broker or their subagent’s opinion of real estate’s value based on evaluating data of comparative properties; also known as BPO

Comps – comparative properties used to help determine value; typically similar properties in size and style, within a 1-mile radius

from the last 6 months of sales/rentals

Contingency Clause – makes the contract reliant on something else occurring

Conventional Loan – loans outside of the government insured programs

Counter offer – an offer made in response to an existing offer; voids the original offer

CTC - Clear to Close - all conditions the bank placed on the borrower have been met 

CTG- Contingent

Deed – a receipt for real estate; transfers title to real estate from one party to another

Default – failure to perform under a contract

DTI – Debt to Income Ratio; monthly gross salary one earns vs. their obligations to creditors each month; front end ratio includes

housing expenses such as mortgage payments, insurance and property taxes and back end ratio includes personal obligations, such

as credit card debt, car loans or student loans

Dual agent – a broker or subagent who works for both the buyer and the seller in the same transaction; must be disclosed and

both parties must consent to it in writing per licensing law

Earnest money – deposit given with offer to purchase

EMD - Earnest Money Deposit -  commonly used abbreviation for earnest money

Easement – a right which one person has in lands of another

Encapsulation – when a hazardous material is covered and sealed off

Estoppel Certificate -  (or Estoppel Letter) is a document often used in due diligence in Real estate and mortgage activities. A document signed by a tenant that states what the current status is on their lease

Federal Housing Administration (FHA) – part of the U.S. Department of Housing and Urban Development (HUD), it insures

mortgage loans originated by qualified and approved lenders

Federal income tax lien – when the Internal Revenue Service places a lien on your real and personal property to claim debt owed

to them; involuntary, general lien

Federal National Mortgage Association (FNMA) – commonly known as “Fannie Mae,” it is a secondary mortgage market buyer

that focuses on FHA/VA loans

FICO score – credit history based on an average of the three major credit bureau ratings; used to determine your financial risk to

lenders during the pre-approval process

Gross Income - consists of income from wages and salary plus other forms of income, including pensions, interest, dividends, and rental income.

Hard money - a short-term, non-conforming loan that does not come from traditional lenders, but rather individuals or private companies that accept property or an asset as collateral.

HELOC – Home Equity Line of Credit; also known as equity line of credit, equity loan, or open-end mortgage; borrower is given a

line of credit against the equity in their home; junior lien

Helping Families Save Their Homes Act – part of Truth in Lending Act; states that while a mortgagor doesn’t have to have

consent from the borrower to sell off their loan to a third party, the mortgagor must inform the borrower of the sale of their loan

HUD – the Department of Housing and Urban Development

Leaseback – purchasing a property and then leasing it back to the seller; frees capital and creates favored tax treatment for seller

Liquidated damages – pre- agreed upon amount of money to be paid in the event of a breach of contract

LLC – a limited liability company; this is a pass through entity that is treated as a legal person

LTV – Loan to Value Ratio

MLS – Multiple Listing Service; database for real estate listings

Mortgage – a legal instrument that conveys conditional title to a lender to collateralize a debt

Mortgage banker – works directly for the bank and can only offer loan products from their bank; can originate loans

Mortgage broker – someone who brings together borrowers and lenders in exchange for a fee

Mortgage commitment – a written notice from lender promising a future loan under certain conditions and terms

Multi-family – property containing several different units, but it not subdivided

Net income – also known as net operating income (NOI), it is the effective gross income minus operating expenses

Offer – a presentation of terms; a shortened letter version is known as a binder or letter of intent and serves similar purpose

PITI payment – principal, interest, property taxes and homeowners insurance payments

Points – an origination fee charged by lenders at closing; one point is 1% of the loan

POF - Proof of Funds

P&S – Purchase & Sale Agreement; an agreement signed between buyer and seller, typically 5-14 days after the offer which

outlines both buyer and seller promises and obligations

Radon – colorless, odorless gas that is the result of the natural breakdown of radioactive elements in the soil; causes cancer; when

levels are above 4pCI/L (picocuries per liter), mitigation is recommended

Rentable square footage – the total amount of square footage including any common area load

REO – Real Estate Owned; a bank owned property which happens if a bank buys its own foreclosure property

RESPA (Real Estate Settlement Procedures Act) – a law requiring full disclosure of closing costs to buyer and seller

Right of first refusal – Effectively “dibs” on a property; provides the person holding the right to match a future offer and buy the

property ahead of anyone else

Title defects – clouds on title or other ownership issues

Title insurance – insurance against the loss of funds due to unknown title defects

Title search – an examination of public records to determine property ownership history

Title V – requires septic system to pass inspection within 2 years prior to sale (or 3 years if pumped every year) or 6 months after

sale; seller and buyer negotiate who brings into compliance if septic system fails inspection

TRID forms – TILA-RESPA Integrated Disclosure forms which creates a more detailed outline of the costs of credit for the

Consumer

UAG - Under agreement

Underground storage tanks (USTs) – any storage tanks for chemicals or gas that are 10% or more buried underground; in MA,

banned under 21E

USDA – United States Department of Agriculture; USDA Financing offer loans to low and moderate-income Americans in rural areas

USDA Multi-Family Housing Program – rental housing loans for very low, low and moderate income

VA Financing – Veterans Affairs financing offered to honorably discharged veterans that allows for 100% financing

W2 – employee status according to IRS classifications