Knowledge base
Real estate terms glossary
55 terms you'll encounter buying a home, a foreclosure or an investment property.
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After Repair Value (ARV)InvestingAfter repair value (ARV) is the estimated market value of a property once planned repairs and renovations are complete. Investors use it to decide how much to pay for a fixer-upper.AmortizationMortgages & financingAmortization is the process of paying off a loan with regular, fixed payments over time. Early payments go mostly to interest; later payments go mostly to principal.AppraisalBuying & closingAn appraisal is a licensed appraiser's independent estimate of a property's market value. Lenders require one to make sure the home is worth at least the amount being borrowed.As-Is SaleBuying & closingAn as-is sale means the seller will not make repairs or offer credits for the property's condition. The buyer accepts the home in its current state, though inspection rights and required disclosures may still apply.
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Capitalization Rate (Cap Rate)InvestingCapitalization rate (cap rate) is a rental property's net operating income divided by its value or price. It shows the property's unleveraged annual return and is used to compare income properties.Cash for KeysForeclosure processCash for keys is a payment a lender or new owner offers to occupants of a foreclosed property in exchange for moving out by a set date and leaving the home in agreed condition, avoiding eviction.Cash-on-Cash ReturnInvestingCash-on-cash return is a property's annual pre-tax cash flow divided by the total cash the investor put in. It measures the yield on your own money after financing.Closing CostsBuying & closingClosing costs are the fees and prepaid expenses paid to complete a real estate purchase, beyond the price and down payment. Buyers typically pay about 2% to 5% of the loan or purchase price.Comparative Market Analysis (CMA)Buying & closingA comparative market analysis (CMA) is a real estate agent's estimate of a home's value based on recent sales, pending sales and active listings of similar nearby properties.ContingencyBuying & closingA contingency is a condition in a purchase contract that must be met for the sale to go through. If it isn't met by its deadline, the buyer can usually cancel and keep their earnest money.Credit BidForeclosure processA credit bid is a bid at a foreclosure auction that the lender places using the debt it is owed instead of cash. The lender can bid up to the amount of its debt without paying any money.
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Debt-to-Income Ratio (DTI)Mortgages & financingDebt-to-income ratio (DTI) is the share of your gross monthly income that goes to debt payments. Lenders use it to decide how large a mortgage payment you can afford.Deed in Lieu of ForeclosureForeclosure processA deed in lieu of foreclosure is an agreement in which a borrower voluntarily transfers ownership of a home to the lender to settle the mortgage and avoid the foreclosure process.Deed of TrustTitle & legalA deed of trust is a security instrument used instead of a mortgage in many states. The borrower gives a neutral trustee legal title as security for the loan until it is paid off.Deficiency JudgmentForeclosure processA deficiency judgment is a court ruling that makes a borrower personally liable for the remaining mortgage debt when a foreclosure sale brings in less than the amount owed.Down PaymentMortgages & financingA down payment is the part of a home's purchase price the buyer pays upfront in cash rather than borrowing. It is usually stated as a percentage of the price and is due at closing.
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Earnest MoneyBuying & closingEarnest money is a deposit a buyer puts down when an offer is accepted to show good faith. It is held in escrow and usually credited toward the down payment or closing costs at closing.EscrowBuying & closingEscrow is an arrangement where a neutral third party holds money or documents until the conditions of a deal are met. The term also refers to the account a lender uses to pay a borrower's property taxes and insurance.
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FHA 203(k) LoanMortgages & financingAn FHA 203(k) loan is a government-insured mortgage that combines a home's purchase price and the cost of repairs into one loan. It lets owner-occupants buy and fix up homes that need work.ForbearanceForeclosure processForbearance is a temporary agreement in which a mortgage servicer lets a borrower pause or reduce payments during a hardship. The skipped amounts must be repaid or resolved later.ForeclosureForeclosure processForeclosure is the legal process a lender uses to take back and sell a property after the borrower stops making mortgage payments, so the lender can recover what it is owed.Foreclosure AuctionForeclosure processA foreclosure auction is the public sale of a property after a borrower defaults, where the highest bidder buys it, usually with cash and as-is. If no one outbids the lender, it becomes bank-owned.
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Hard Money LoanMortgages & financingA hard money loan is a short-term loan from a private lender, secured mainly by the property's value rather than the borrower's income. Investors use it to buy and renovate properties quickly.Home EquityMortgages & financingHome equity is the portion of a property you own outright: its current market value minus everything owed on it. It grows as you pay down the loan and as the home's value rises.Home InspectionBuying & closingA home inspection is a professional visual examination of a home's structure and systems, ordered by the buyer to find defects before closing. It usually happens during the inspection contingency period.
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LienTitle & legalA lien is a legal claim against a property that secures a debt. It must usually be paid off before the property can be sold with clear title, and the creditor can force a sale in some cases.Lis PendensForeclosure processA lis pendens is a recorded notice that a lawsuit has been filed involving title to or an interest in a property, such as a judicial foreclosure. It warns buyers that the outcome could affect ownership.Loan ModificationForeclosure processA loan modification is a permanent change to a mortgage's terms, such as a lower rate, longer term or added past-due amounts, that a lender agrees to so a struggling borrower can afford payments.Loan-to-Value Ratio (LTV)Mortgages & financingLoan-to-value ratio (LTV) compares the size of a mortgage with the property's value. A lower LTV means more equity and less risk for the lender, which often brings better loan terms.
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MortgageMortgages & financingA mortgage is a loan used to buy real estate, secured by the property itself. If the borrower stops paying, the lender can take the property through foreclosure to recover what is owed.Mortgage Pre-ApprovalMortgages & financingA mortgage pre-approval is a lender's conditional commitment to lend up to a set amount, based on verified income, assets and credit. Sellers often expect one before accepting an offer.
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Net Operating Income (NOI)InvestingNet operating income (NOI) is a rental property's yearly income minus its operating expenses, before mortgage payments, depreciation and income taxes. It is the basis for cap rate.Non-Judicial ForeclosureForeclosure processA non-judicial foreclosure is a foreclosure carried out without a lawsuit. A trustee sells the property at auction under the power-of-sale clause in the deed of trust or mortgage.Notice of DefaultForeclosure processA notice of default (NOD) is a public notice, recorded with the county, stating that a borrower has fallen behind on a mortgage or deed of trust and that the lender may move toward foreclosure.Notice of Trustee SaleForeclosure processA notice of trustee sale is the public notice, in a non-judicial foreclosure, that sets the date, time and place a trustee will auction a property to repay the defaulted loan.
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PITIMortgages & financingPITI stands for principal, interest, taxes and insurance, the four parts of a typical monthly mortgage payment. Lenders use it to judge whether a borrower can afford a home.Pre-ForeclosureForeclosure processPre-foreclosure is the period after a lender files a default notice or foreclosure lawsuit but before the property is sold at auction. The owner still holds title and can sell or catch up.Private Mortgage Insurance (PMI)Mortgages & financingPrivate mortgage insurance (PMI) protects the lender, not the borrower, if a borrower defaults on a conventional loan. It is usually required when the down payment is less than 20% of the home's value.
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Real Estate WholesalingInvestingReal estate wholesaling is putting a property under contract at a discount and then assigning that contract, or reselling the property, to another investor for a fee, without renovating it.RefinanceMortgages & financingTo refinance is to replace an existing mortgage with a new one, usually to get a lower rate, change the loan term, or take cash out of the home's equity.ReinstatementForeclosure processReinstatement is bringing a defaulted mortgage current by paying all past-due payments, late fees and foreclosure costs in one lump sum, which stops the foreclosure and restores the original loan.REO / Bank-Owned PropertyForeclosure processAn REO (real estate owned) or bank-owned property is a home a lender took back after it failed to sell at foreclosure auction. The lender then sells it, usually through a real estate agent.Resale (After Foreclosure)InvestingA resale is the last stage of the foreclosure lifecycle: a buyer or investor who bought the property at auction or from the bank repairs it, then lives in it, rents it out or sells it again on the open market.Right of RedemptionForeclosure processA right of redemption lets a foreclosed homeowner reclaim the property by paying the full amount owed, either before the foreclosure sale or, in some states, for a set period after it.
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Tax LienTitle & legalA tax lien is a government's legal claim against a property for unpaid taxes. Property tax liens usually take priority over mortgages and can lead to a tax lien certificate sale or tax deed sale.The 70% RuleInvestingThe 70% rule is a fix-and-flip guideline: pay no more than 70% of a property's after repair value (ARV) minus the cost of repairs. It leaves room for profit, holding and selling costs.Title InsuranceBuying & closingTitle insurance protects a buyer or lender against losses from ownership problems that existed before the purchase, such as undisclosed liens, forged documents or recording errors. It is paid once at closing.Title SearchTitle & legalA title search is a review of public records to confirm who legally owns a property and to find any liens, judgments, easements or other claims that could affect ownership.TrusteeForeclosure processIn real estate, a trustee is the neutral third party named in a deed of trust who holds legal title for the lender and can sell the property at a trustee sale if the borrower defaults.
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Disclaimer: The information on this page is for general educational purposes only and is not legal, financial, tax or investment advice. Laws, lending rules and market conditions vary by state and change over time, and any figures shown are estimates. Before you buy, sell, finance or bid on a property, consult a qualified attorney, financial advisor, lender or licensed real estate professional about your situation.