Glossary of Property Terms

1031 Exchange

A 1031 Exchange is an IRS provision that allows investors to defer (put off) paying capital gains tax on the sale of an investment property by reinvesting the proceeds into a "like-kind" property. However, you cannot have access to the profit gained from the sale. You must entrust it to a Qualified Intermediary, and they must hold the proceeds in a qualified escrow account until they transfer them to the new property during purchase. A 1031 Exchange has strict deadlines, meaning you have only 45 days to identify a potential replacement property and 180 days to complete the exchange by purchasing the new property. A 1031 Exchange only applies to investment or business use, not personal real estate sales.

Accessibility

Accessibility in regard to real estate refers to the property's ability to be entered, used, and navigated by everyone, including individuals with physical disabilities. It involves incorporating features such as ramps, wide doorways, grab bars, extra room for moving around, and other accommodations to ensure that people in wheelchairs or using walking assistance can easily use the building. Accessibility also includes design aspects like accessible light switches, counters, sinks, and outlets that are at a lower height, making them easier to use. Additional supports include assistive listening devices or visual alerts for people with hearing impairments. In public properties, accessibility is legally required by the Americans with Disabilities Act (ADA). ADA is not required in private residences.

Adjustable-Rate Mortgage (ARM)

An Adjustable-Rate Mortgage (ARM) is a type of home loan where the interest rate can change during the life of the loan. With a fixed-rate mortgage, the interest rate stays the same until the loan is paid off. ARMs often start with a lower interest rate for a set number of months, then increase based on the current market rate plus an additional margin (which is a percentage set by the lender). As the ARM rates fluctuate, your mortgage payment will change along with it. Your loan documents dictate the rules governing ARMs. Most ARMs have caps to protect borrowers that limit how much the rate can increase or decrease over the life of the loan.

Amortization

When you take out a mortgage to buy property, you owe a monthly payment including principal and interest. Amortization refers to the process of paying off a loan through regularly scheduled payments. Amortization is the process of spreading the cost of a debt over time. An amortization schedule is a list of each payment and shows the percentage that goes towards lowering your principal balance, and how much goes towards interest. You should receive an amortization schedule along with your loan documents. A longer amortization period means you will have smaller monthly payments and the loan will be paid off quicker, but you will pay more in interest because interest is paid off during the early payments and tapers off.

Annual Service Charge

Property owners who live in homeowners' associations or managed developments pay an annual service charge to cover the cost of maintaining "common" or shared areas of the property. Some common expenses covered are landscaping, snowplowing, lighting, insurance, elevators, security, painting, roofs, and building repairs. You will find annual service charges in apartment complexes, condos, and gated communities. Typically, homeowners or lessees pay the fee in monthly installments to spread them over a 12-month period and are paid to a property management company. These annual service charges factor into your overall monthly housing costs, and banks will use that when determining how much you can borrow. These fees also impact the overall value of the property and its affordability.

Appreciation

Appreciation, as it relates to property, is how the property's value increases over time. The value rises naturally due to market demand, low inventory, economic growth of a specific area, and desirable locations. Other ways a property value can increase are through renovations. If the owner completely redoes the kitchen and baths, updates flooring and other fixtures, and replaces the roof and HVAC systems, the property will be worth more. This is referred to as "forced appreciation" as it has nothing to do with market conditions. Any change that increases the value of the property may allow owners to potentially sell their property for more than they paid, earning them a profit on their investment. Appreciation benefits the entire community.

As-Is Condition

When a property sells "as-is," it means the seller will not make any repairs, renovations, or upgrades before the sale, and they do not guarantee the condition of the property. The buyer must accept the property in its current state and condition and will have to pay for any existing or future repairs. Although the seller won't make any repairs, they still must disclose any "known defects," such as mold or foundation issues. As-is houses can sell for far less than fair market value (to compensate for any necessary repairs), making them a potentially good investment for investors or house "flippers." Buyers should always have a thorough home inspection to learn about the property's real condition before buying.

Assessment

A property assessment is the process of determining a property's fair market value (FMV) for the purpose of property taxes. The local county/town assessment office performs (typically annual) assessments based on the property's condition, location, features, amenities, and local market. They compare recent sales in the area to the target home to determine value. After determining each property value, the office sets the property tax rates for that home. Homeowners can check with the local taxing authority to verify their information and resolve any errors. If the owner disagrees with the property assessment, there is usually a process for appealing it. Some counties/cities also offer tax exemptions to lower the assessed value and help the homeowner afford the taxes.

Auction

A property auction is when real estate is sold through a public auction, usually after foreclosure. A distressed property means the owner could not pay the mortgage, taxes, or other financial obligations, and the lienholder repossessed it and sells it at auction. Typically, auctions are advertised, and buyers must pre-register and come with cash in hand. Auction properties often sell for far less than market value, making them desirable if they are in good condition. The seller typically lists them "as-is" and provides no warranty or guarantee of the condition. The person who bids the highest wins the auction and can buy the property. If the bank is the highest bidder, the property becomes real estate owned (REO).

Bargain and Sale Deed

When property is sold through a foreclosure, tax, or estate sale, the seller uses a Bargain and Sale Deed to transfer ownership to the buyer. This type of deed indicates that the seller has the legal right to sell the property, but does not guarantee that the title is free of defects or liens. The buyer accepts that this offers them virtually no protection, and they are responsible for handling any future title issues. Since often these property sales are handled by sheriff's offices, tax authorities, or trustees, these individuals may have very little knowledge of the property's history and ownership. These types of deeds provide slightly more protection than a quitclaim deed but less than a warranty deed.

Bridge Loan

A bridge loan is a short-term loan that borrowers use to bridge the gap between needing cash for a specific purpose and having the necessary funds. It is most often used when purchasing real estate. For example, if someone wanted to buy a house but hadn't yet sold their current home, they would take out a bridge loan to pay for closing fees and the down payment, and when the old house is sold, they pay off the bridge loan. Although bridge loans can provide quick access to capital, they come with high interest rates, steep fees, and a short repayment term (12 months). Businesses use these loans to fund a project or investment before they have the money.

BRRRR Strategy

BRRRR Strategy is a real estate process for building a portfolio of rental properties. The acronym stands for Buy, Rehab, Rent, Refinance, Repeat. The goal of the BRRRR Strategy is to purchase property well below market value, fix it up to increase the value, and then rent it out to start generating income. Once the property is making money (generally 1 year), the last two steps involve refinancing it (now that it is worth more) and using the equity to purchase a new property and repeat the process. Typically, investors look for distressed properties in good condition or those that need a little TLC. Renovations may include cosmetic fixes (paint, new flooring, upgraded kitchen/bath) or substantial structural work.

Building Permit

Before building new construction, renovating, or demolishing buildings in the U.S., most things require a building permit. You can obtain a building permit from the local government (usually the town or county building/development office or building inspector's office). A building permit is an official license allowing you to move forward with your construction project. To obtain a building permit, you must apply, providing sufficient documentation about the project and paying the required fee. Once approved, the local government must inspect the work to ensure it complies with building codes, zoning laws, and safety regulations. Structural, electrical, and plumbing work almost always requires a permit. The goal of building permits is to keep property owners and the public safe.

Buyer's Agent

In real estate deals, there are two types of agents. A seller's agent represents the seller and helps them to advertise the property, negotiate the sale, and assist with documentation and closing. A buyer's agent represents the buyer and helps them navigate the entire purchase process. They will first help the buyer find the right property by listening to their needs. These agents will attend showings with the buyer and be there during the appraisal and inspection, offering advice and asking questions to ensure the buyer gets the best deal. They may also help negotiate price and other contingencies with the sale. Buyer's agents can also help connect buyers with lenders and insurance companies and help out with closing tasks.

Cap Rate (Capitalization Rate)

There exists a fine science to investing in property. One of the key metrics investors use is a cap rate, or capitalization rate, which determines the profitability of an income-producing property. The formula works by dividing the property's Net Operating Income (NOI) by its current market value. The NOI is the property's annual income after all operating expenses are paid but before any mortgage and interest payments. For example, a property with a NOI of $60,000 worth $1,000,000 has a cap rate of 0.06 or 6%. Generally, a higher cap rate indicates more potential risk but also a higher potential return. Investors use cap rates along with other metrics to measure a property's potential risk and return.

Capital Gains Tax

Capital gains tax is the tax you pay when you sell an asset, such as property. If your property is worth considerably more than you paid for it, or currently owe on it, your profit is the amount that you will be taxed upon. The tax rate will depend on how long you held the asset (real estate) and how much income you make. If you had it only for one year or less and sold it for a profit, it will be considered a short-term capital gain and taxed as ordinary income. If you held it for longer than one year and sold it for a profit, it is regarded as a long-term capital gain.

Cash Flow

Cash flow in regard to real estate is the difference between the total income a property generates and all the expenses associated with its operation and maintenance. It is the amount left over after all expenses are paid each month. Positive cash flow means the income generated is more than the expenses, which results in a profit. Negative cash flow indicates that the expenses exceed the monthly income, resulting in an operating loss. Zero cash flow means the income and expenses are equal, canceling each other out. Income can include rent and other expenses such as parking fees or laundry machines. Expenses include mortgage and interest, maintenance and repair costs, insurance, property taxes, property management fees, and utilities.

Clear Title

A title is a concept of property ownership. It is documented through deeds and transfers of real property. A clean title means that the owner is the actual legal owner of a property, free to sell or dispose of it as they see fit. A clear title also confirms that the property is free from liens, debts, legal disputes, or other encumbrances. A clean title ensures that there are no outstanding claims, judgments, lawsuits, or boundary issues that could infringe upon the owner's right to the property. No one else can legally claim ownership of the property. Before lending borrowers money to buy a house, banks will require a title search and a clean title to protect their investment.

Closing Costs

When purchasing a piece of real property, buyers and sellers are subject to a list of miscellaneous fees when completing the transaction (closing). These fees are in addition to the down payment. They cover all the services needed to process the sale. Some examples are the appraisal, title insurance, realtor commissions, attorney fees, loan origination fee, recording fees, points, and mortgage insurance. Both the buyer and seller pay closing costs. Typically, the seller will pay realtor fees, title insurance, and some transfer taxes, and the buyer will pay the majority of the expenses. Generally, closing costs total 2-5% of the home's purchase price. In some cases, both parties will split the closing costs as part of the deal.

Cloud on Title

Before the sale of property, a title agent will conduct a title search. As a result, the agent may find a "cloud on title" which indicates a legal issue that calls into question the property ownership. Even if the claim, encumbrance, or lien is invalid, it still could affect the current owner's rights and cast doubt on the property, making it less desirable. A cloud on the title must be resolved before the property can be sold. Some examples would be mechanic's or tax liens, clerical errors in documents, fraud, boundary issues, or unresolved probate matters. These can complicate real estate transactions and must be fixed by paying off liens, filing a quitclaim deed, or performing other quiet title actions.

Comparative Market Analysis (CMA)

A comparative market analysis (CMA) is a report prepared by a real estate professional that estimates a property's current market value. The agent uses "comps," recently sold homes in the area with similar characteristics like size, features, amenities, and location, to determine the fair market value (FMV). Sellers use the CMA report to set a competitive listing price to sell the property quickly. Buyers use the report to justify the cost and consider the property details along with the current market conditions. A CMA is more informal than an appraisal and is used by buyers and sellers before engaging in the purchase and sale process. The report focuses only on sales data from the previous 3 to 6 months.

Comps

Comps or "comparables" are recently sold, similar properties. Appraisers and others use comps to compare residential and commercial buildings for sale. They use the comps and adjust as necessary (adding or subtracting value for amenities) to determine the proper price. When evaluating a real estate sale, the appraiser or real estate agent typically uses homes in the same area that have sold recently, within the past 3-6 months. In terms of commercial property, comps are used by analysts to determine a fair market value based on their revenue-generating performance metrics. Professionals factor in location, condition, size (sq. footage and lot size), age, and the number of bedrooms and bathrooms, as well as renovations. One method used is EBITDA.

Condo

A condo, or condominium, is a type of housing situation where owners buy a unit within a larger complex. Homeowners are responsible for their own expenses but also must pay condo fees, which maintain common areas and shared spaces like hallways, driveways, the building's exterior, and amenities like pools, gyms, and recreational centers. These fees are paid to the homeowners' association (HOA), which maintains the development and hires workers to perform maintenance like lawn mowing, snow plowing, repairs, and painting. Condos are "owned," not rented, like apartments, and the owner can lease it or sell it anytime. With a condo, you own your unit outright, but you are a tenant in common with other owners regarding the shared areas.

Contingency

In regard to real estate, contingency is a condition that must be met for the purchase to be completed. Contingencies are outlined in the purchase and sale agreement, and they are designed to protect the buyer and allow them to get out of the contract without losing any money if certain conditions are not met. Most often, these contingencies relate to financing, inspection, appraisal, and title searches. For example, if the buyer cannot get a mortgage or the inspection comes back with multiple issues, the buyer can withdraw their offer and not buy the house without any penalties. Buyers can terminate the contract if the contingencies are not met within a specific amount of time, meaning they have a deadline.

Deed

A deed is an official legal document that transfers real property from one party (the grantor) to another (the grantee). The deed conveys title, the right to ownership, along with any specific encumbrances or restrictions. A deed also includes the name and address of the grantor and grantee, along with a specific description of the property and its location (using landmarks or coordinates). To be legal, the deed must be in writing (often notarized) and contain language that conveys the intent to transfer the property ownership. They may also include the price of the property. Once all parties have signed the deed, it is recorded with the local county office (usually the county recorder's office or county clerk).

Distressed Property

Distressed property refers to real estate that is in financial trouble or in poor physical condition. Typically, a property becomes distressed when the owner cannot meet the house's financial obligations, such as missed mortgage or property tax payments. These houses often sell for well below fair market value (FMV). Distressed property is usually seized and sold at auction after foreclosure by the lender, tax official, or through a court judgment. Some types of distressed property are pre-foreclosure, foreclosure, short sales, and bank-owned or real estate-owned (REO) properties. Many are in perfect condition, but some are in disrepair and need work. Distressed properties can be found in tax sales, but may have legal issues that complicate matters.

Duplex

Similar to a condo, a duplex is a single building that has two housing units. Each has its own entrance and separate amenities. The units may be side-by-side or top to bottom. They usually share one wall or a floor/ceiling. Although the two owners share the building, their units are completely separate with their own interior, utilities, and sometimes garages. The building may share a yard or driveway. Owners enjoy their own kitchen, bathrooms, bedrooms, and living areas with complete privacy and independence. Some have shared facilities like laundry. Although duplexes have more privacy than an apartment, they have less than a single-family home. Owners share financial responsibilities such as yard maintenance, snow removal, and building maintenance.

Electrical Inspection

An electrical inspection is when a certified electrician performs a professional assessment of a property's electrical system to ensure it is safe, functions correctly, and complies with local building codes. It may include checking the wiring, GFCIs, smoke detectors, outlets, switches, and the electrical panel for proper sizing, correct installation, damage, corrosion, or outdated systems to prevent fires and electrocution. Inspectors will also look for signs of overheating or damage. Most often, these inspections are performed when the property changes hands before a sale. Some owners may opt for an electrical inspection themselves to maintain safety and prevent serious electrical issues or injury, which might lead to lawsuits. These inspections are also performed whenever the homeowner has substantial renovations done.

Environmental Permit

Before building something new or substantial property renovations, the property owner or contractor needs to apply for an environmental permit. This permit is an official authorization from the local, state, or federal government that allows the project to begin. The evaluation and permit are designed to ensure that the project meets environmental regulations and protects natural resources and human health. They most often relate to wetlands, land development, waste management, waterfront construction, air/water pollution, and wildlife habitats. Some examples are filling land, installing docks, and removing vegetation. These inspections and permits are generally issued by the state's environmental protection agency (EPA). Violation of these laws may subject the owner or contractor to fines, lawsuits, and stop-work orders.

Escrow

When buying property, the buyer must pay a down payment. The deposit is held by a neutral third party in an escrow account by an escrow agent. They keep these funds until the transaction is completed, and all the agreed-upon conditions of the sale are met. Escrow protects all parties by ensuring that the buyer receives the title and the seller receives the payment for the house once all terms of the sale are fulfilled. Mortgage escrow is where a lender bills the homeowner/borrower each month for principal and interest, plus money to pay the insurance and property taxes. They hold onto the tax and insurance money in an escrow account and then pay the bills from the escrow.

Eviction

Eviction is a legal process where a landlord or property owner forces a tenant to vacate a property. There are strict local and state laws regarding evictions. Tenants have rights, and unless they violate the lease agreement by damaging the property, conducting illegal activities on premises, not paying their rent, or having pets in a "no pets" unit, it is difficult to evict. Evictions also occur when the government or lender has foreclosed on a distressed property, and it is sold at auction. The winning bidder may have to evict the previous owners if they refuse to move. The local sheriff's office often handles this. Usually, the person evicting must obtain a court order to remove someone from the property.

Fixed-Rate Mortgage

A fixed-rate mortgage is a home loan used to purchase real property that has an interest rate that remains the same for the life of the loan; it never changes. That means your principal and interest payments will stay the same until you pay off the mortgage. Many people prefer a fixed-rate mortgage over an adjustable-rate mortgage due to the consistency and long-term stability. It protects you against any huge increases in market interest rates and provides predictable housing expenses. These loans have a maximum repayment term of 30 years. Some borrowers opt for a 15-year term. The only downside is that you won't benefit if rates drop unless you completely refinance the loan.

Fixer-Upper

A fixer-upper in regards to real estate is a property, usually a house, that needs some work. It may require extensive cosmetic or structural work, but they are typically inhabitable even before the job is done. Due to their condition, they usually sell for much less than fair market value, and "flippers" buy them to fix them up and sell at a profit. Some of the issues could be as simple as paint, flooring, and minor repairs. Whereas the house might need more substantial work, like an entirely new kitchen, bathroom, roof, or structural repairs. Purchasing and fixing up a fixer-upper in a good location will make it much more desirable to buyers in the future.

Flipping

The art of "flipping" is finding distressed properties in good neighborhoods, buying them, fixing them up, and selling them for a profit. Some people are professional flippers who have a team of carpenters, electricians, plumbers, and other construction professionals who swoop in quickly after the purchase to fix, renovate, upgrade, and improve the house dramatically to increase its value. Typically, flippers purchase, fix, and sell these homes quickly to maximize their profits. The act of renovating and improving the property to increase its value is called "forced appreciation." Improvements range from paint, new fixtures, and flooring to structural fixes like a new roof or foundation repairs. A strong market is paramount to success for flippers, making the timing critical.

Flood Insurance

Flood insurance is a type of insurance that protects a home and its contents from damage caused by flooding. Flooding is defined as excess water on land that is usually dry, affecting two or more properties or acres. A typical homeowner's insurance policy does not cover flood damage, and in some areas, you cannot even get flood insurance. In others, it may be a requirement of your mortgage. If you live in a flood-prone area, you can get flood insurance from the federal National Flood Insurance Program (NFIP) administered by the Federal Emergency Management Agency (FEMA). It provides support for flooding due to overflowing rivers, heavy rainfall, and mudflows. Flood insurance is much more expensive than standard homeowners' insurance.

Flooding

Flooding is the accumulation of water on land that is usually dry. Some of the causes are heavy rainfall due to storms, overflowing rivers, tidal waves, coastal storms, or dam breaks. Flooding can happen anywhere, not just in places near natural bodies of water. Floods fall into categories such as fluvial (river floods), pluvial (heavy rain/urban floods), and coastal floods. Hurricanes are a common source of flooding. Snow melting after a harsh winter can also result in floods. Flash floods are fast-moving floods that result from intense short-term rainstorms. Unusual floods involve the overflow of a large volume of a different liquid, such as a molasses tank explosion in 1919 or a wine spill in 2023.

Foreclosure

When a homeowner defaults on their mortgage or fails to pay their property taxes, the lender or local government can foreclose on the property and sell it at auction to pay off the debt. Foreclosure is the legal process they must use to do so. It involves strict steps like sending the owner a "Notice of Default," working with the homeowner to come up with an alternate plan, advertising the auction, holding the auction, and selling the property. If the owner does not move out, the new owner may have to evict, involving the local sheriff. Judicial foreclosures go through the courts, and non-judicial foreclosures do not require the courts. Regardless, the lender must follow a state-mandated process.

Freehold

The term "freehold" refers to a type of property ownership. It means you own both the property itself (house) and the land it sits on outright without any duration. You have complete control over it, and your ownership never expires. You can sell it or use it however you choose, as long as you follow planning or zoning laws. Freehold differs from "leasehold," which is when someone leases property and can only occupy and use it for a specific set of time. At the same time, the land and buildings ultimately remain the property of the freeholder. As the freeholder, you are responsible for insuring the entire property, including the land. In business, freehold land and buildings are fixed assets.

Grant Deed

A grant deed is a legal document used in real estate transactions to transfer ownership of a property from a seller (grantor) to a buyer (grantee). It provides limited protection to the buyer. It promises that the seller has not already transferred the property to someone else, and it is free from undisclosed encumbrances (like mortgages or taxes) that occurred during the seller's ownership. A warranty deed guarantees the property's title against issues that existed before the current owner held it, but a grant deed does not. A grant deed includes the names of the grantor and the grantee, a legal description of the property, and the signatures of all parties involved. Grant deeds must be recorded to be legal.

Hard Money Loan

A hard money loan is a short-term loan that you secure with a physical asset (like real estate) rather than your creditworthiness or income. In such cases, a person with terrible credit could get a loan by putting their property up as collateral. Hard money loans usually close quickly, have flexible terms, and have higher interest rates than traditional bank loans. You are paying for the benefit of a quick loan tied to real estate without going through the typical approval process. Investors use hard money loans to gain quick access to capital for additional real estate transactions. It is common when flipping homes. These loans typically come from private individuals or companies rather than banks or credit unions.

HOA Lien

An HOA lien is a legal claim that a Homeowners Association (HOA) places on a property due to unpaid fees, dues, or assessments. If, for example, a condo owner fails to pay their condo fees for months or refuses to pay a special assessment (to repair the roof of the building) that other unit owners paid, the HOA board can impose a lien on the property to recover the outstanding amount. The HOA lien prevents the homeowner from selling or refinancing the property until the outstanding balance is paid in full. If the debt remains unpaid for an extended period of time (depending on state laws), the HOA can foreclose on the property and sell the home to pay off the debt.

Holding Costs

In real estate, holding costs (or carrying costs) are recurring expenses associated with owning a property. These expenses occur during the period when it is not being sold or rented out. Some examples of holding costs are mortgage payments, property taxes, insurance premiums, utilities, maintenance and repairs, HOA fees, and property management fees. Holding costs can significantly impact an investor's cash flow and reduce the return on investment (ROI) if they accumulate without any offsetting rental income. The rental income the property generates must be higher than its holding costs to be profitable. Holding costs are especially crucial for house flippers, who must turn the property around quickly, so the expenses do not accumulate and diminish their profit.

Home Equity Loan

A home equity loan is a type of loan that allows borrowers to tap into the equity in their home, providing them with cash for various home-related purposes. Most often, homeowners use this to fund renovations, repairs, or other expenses, such as college for their children. Borrowers can receive a certain lump sum of cash when using their house as collateral. Typically, banks offer fixed-rate home equity loans, and borrowers pay them off monthly over an agreed-upon time period. You can only borrow a certain amount. The house must retain some equity in case the real estate market shifts and you default on the loan; the lender needs to know that they can recover their investment.

Home Inspection

A home inspection is a professional evaluation of a property's physical condition. These inspections are conducted by a trained inspector who identifies issues with the property's structure, systems, and major components. It typically covers the exterior (siding, windows, doors), interior (walls, floors, stairs), roof (shingles, flashing, gutters), foundation, plumbing (pipes, fixtures, water/sewage systems), and electrical systems (wiring, outlets, electrical panel), HVAC (heating and cooling systems), venting (air quality), insulation (energy efficiency), and fire hazards (smoke detectors, chimneys). The home inspection is non-invasive and is designed to help buyers make an informed decision. If significant issues are found, the buyer can negotiate a better price, demand that the seller rectify the problems before closing, or withdraw from the sale.

Homeowners Insurance

Homeowners insurance is a type of property insurance that provides financial protection in the event of damage to your home. It covers the structure, your personal belongings, and personal liability if someone gets hurt on your property. Lenders require homeowners' insurance when you borrow money to buy the home. Some covered perils are fire, theft, and weather damage. Most policies do not cover earthquakes or floods. You would need a separate policy to cover those items. A typical policy covers the dwelling and any attached structures, as well as detached structures like fences and sheds, and personal property, including furniture, clothing, and electronics. Most also have loss of use coverage, which provides compensation if your house becomes uninhabitable.

Homestead Exemption

Some states offer property owners a homestead exemption, which can reduce the homeowner's tax burden and protect the property from certain creditors, such as those resulting from bankruptcy or other unsecured debts. Homestead exemptions have additional benefits that vary by state or even local jurisdiction. When applying for a homestead exemption, the property owner must complete an application with the local property appraiser or tax assessor's office by the specific deadline. They must also use the residence as their primary housing. The exemption reduces the assessed value of the home, resulting in a lower property tax bill. A homestead exemption does not protect against all types of debts; the IRS could still seize the property to pay taxes.

HVAC Inspection

An HVAC inspection is a routine evaluation of your home's heating, ventilation, and air conditioning system by a certified technician. It's crucial to regularly inspect the systems to find problems before they become costly or the system breaks down. The goal of an HVAC inspection is to evaluate the system's overall health, efficiency, safety, and performance. During an inspection, several key components are checked, including the furnace, air conditioner, ductwork, electrical connections (such as capacitors and contacts), thermostats, refrigerant levels, and safety features (like automatic shutoff switches), to ensure that everything functions properly and the system lasts as long as possible. Proper maintenance of your HVAC system can significantly extend its lifespan, improve indoor air quality, and ensure safety.

Inspector's Report

During a real estate sale, the buyer has the right to a full inspection. The property inspector will arrive, fully evaluate all areas of the house, and prepare an inspector's report. The report will include details about every aspect of the home, the quality of items checked, and safety features. It will include photographs, diagrams, and a written description of everything. The report will detail visible defects and potential problems and include recommendations for further evaluation and repairs. The purpose of the report is to help buyers make an informed decision about the sale. If the inspector identifies major issues, the buyer can cancel the contract, demand that the seller rectify the problems before closing, or negotiate a revised price.

Investment Property

Investors seek properties to purchase, rent out, or renovate and resell. These are called investment properties. They are not intended for personal use, but rather to generate revenue through ongoing rental income or profit from the sale of property. These properties can be either residential or commercial. The goal of investing in property is to build wealth through long-term gains, as real estate typically appreciates over time. Typically, investors seek properties that generate profits, such as distressed properties, which are easy to renovate and can be either flipped or rented out. Most try to buy them with cash to reduce the operating expenses of owning the property. Investors are responsible for expenses like insurance, taxes, and maintenance.

Judgment Lien

A judgment lien is a legal claim on property. When a homeowner fails to pay a creditor, the lender can file a lawsuit against the homeowner. If they win, they can place a lien on the property. If the homeowner still refuses to pay, the creditor can force a sale to recover their money. The lien remains on the property until the debt is fully paid. Judgment liens take priority over any subsequent liens. Judgment liens are considered "involuntary" and must be processed through the courts. The homeowner can remove a judgment lien by paying off the debt in full. After the debt is paid, the creditor must file a "satisfaction of judgment" with the courts to remove the lien.

Landlord

A landlord is the owner of a residential or commercial property who leases or rents it out to others to use for business or personal use. A good example is apartments where people rent units and the owner is the "landlord." The tenants pay the landlord monthly rent to use the space. The landlord is responsible for property maintenance, finding and screening tenants, lease agreements (creating and enforcing), and must follow state or local landlord-tenant laws. Landlords also collect rent and may take collection actions against tenants who do not pay. Once the lease ends, the landlord has the right to regain control of the premises. They can also take legal action against tenants who violate the rental/lease agreement.

Lease Agreement

A lease agreement is a legally binding contract between a landlord (owner/lessor) and a tenant (lessee). The lease agreement outlines the terms for the rental of property (residential or commercial). Included within are the parties involved, property details, security deposit details, lease period, amount of rent to be paid, responsibilities of each party (including payments for utilities, pet policies, and security deposits), and specific rules about the property's use. A lease agreement is designed to provide stability, outline clear expectations, and enable both parties to enter into the agreement with a comprehensive understanding of all the details. They must adhere to all state and local landlord-tenant regulations. If either party breaches the contract, the other can take legal action.

Leasehold

A leasehold is a legal agreement in which a person or entity has the right to use and occupy a property for a fixed period, but does not own the land on which it sits. The property owner, also known as the leaseholder, pays the freeholder (the landowner) for the right to occupy and use the land. The leaseholder pays the freeholder rent for the use of the land, as well as service charges for the maintenance of the property and common areas. This arrangement differs from freehold as the leaseholder has temporary ownership only for the specified term in the lease. At the end of the lease, the property reverts back to the freeholder unless the lease is extended.

Length of Lease

Lease agreements define the terms of a property rental from a landlord to a tenant. Within the terms are the specific timeframe, or "length of lease," during which the tenant can use the property. The length of the lease refers to the duration for which a lease agreement remains in effect. Leases can be fixed-term, meaning they have a definite start and end date, or periodic (indefinite), which carries on until one party terminates the agreement. A fixed-term lease agreement is one in which an individual rents an apartment for a specified period, typically a year. A period lease term would be a month-to-month rental. They vary depending on several factors, including location, type, and the parties.

Liability Insurance

When someone gets hurt while on your property, you can be held legally responsible for their physical injuries. Liability insurance is a policy that protects you financially against claims from people who get hurt while on your property. It is usually bundled with homeowners' and auto insurance. It covers the injured person's medical bills, property repairs, and legal fees. This coverage also extends to situations where you damage another person's property with your car, such as hitting the neighbor's fence. It will pay to replace or repair the damage. If you cause damage, someone is injured on your property (e.g., falls on icy steps), or you cause damage to someone else's property, your liability insurance will cover the costs.

Lien

A lien is a legal claim against property for an unpaid debt. The most common type of lien is a mortgage lien. When you borrow money to buy a house, the lender will place a lien on the property, so if you fail to pay the mortgage, they can foreclose, sell it, and reclaim their money. Other types are mechanic's liens, judgment liens, and tax liens. These are recorded on the property title and can affect a sale or refinancing. Too many liens make a property undesirable and make it difficult to sell. These liens must be paid off before the property can change hands. More serious liens, like tax liens, can result in foreclosure and loss of the home.

Listing Agent

Licensed real estate professionals help both buyers and sellers. A listing agent helps a homeowner (seller) to market and sell their property. They represent the seller and perform actions to protect the seller's interest. They will conduct a comprehensive evaluation of the home, determining the optimal listing price, take professional photos of the house, advertise it in the Multiple Listing Service (MLS) and other marketplaces, and even assist with negotiating the sale. They will also prepare documentation, such as the purchase and sale agreement. They help the seller navigate the complex process of selling a house. A listing agent will arrange and attend buyer showings of the property. As a listing agent, they ensure that the seller's wishes are met.

Listing Agreement

A listing agreement is a legal contract between a property owner (the seller) and a real estate agent (the broker). The agreement allows the agent to represent the seller in the sale of their property. It outlines the terms and conditions of the relationship, including the listing price, duration of the agreement, and agent's commission. It also includes details about the property, the seller's and agent's obligations, and other details. There are a few types, such as Exclusive Right-to-Sell, Exclusive Agency, Open Listing, and Net Listing. Each one outlines how the agent gets paid, who finds the buyer, and whether the seller can work with multiple agents or only the one with whom they sign the agreement.

Loan-to-Value (LTV) Ratio

A Loan-to-Value (LTV) ratio is a percentage that compares the amount of a loan to the appraised value of a property. You can calculate LTV by dividing the loan amount by the property's value and converting it to a percentage. Lenders use the LTV to gauge the risk associated with the loan. A higher LTV indicates a higher risk (less property equity), often resulting in worse loan terms, such as a higher interest rate. Lenders often have strict LTV limits when lending money to buy property. An LTV directly impacts the terms of your mortgage. A lower LTV (usually with a larger down payment) will help you earn lower interest rates and no private mortgage insurance (PMI).

Loss of Use Coverage

If your house is damaged in a fire and you have to move out because it is uninhabitable while being repaired, loss of use coverage can help you cover the costs of temporary living expenses. For example, suppose you must relocate to a hotel while your home is being rebuilt. In that case, your loss of use insurance coverage will help cover costs such as hotel bills, meals, pet boarding, temporary furniture, laundry fees, transportation (rental cars/public transportation), and moving expenses. There are limits to this coverage, and you must document everything (keep your receipts) to be eligible for reimbursement. However, you cannot splurge; you must keep expenses "normal" and "regular", or the insurance company will not pay for them.

Mechanic's Lien

A mechanic's lien is a legal claim or "hold" against real property for an unpaid debt. Typically, when a contractor, subcontractor, laborer, or material supplier does work or supplies materials on a property and the owner fails to pay them, they can file a mechanic's lien against the property with the county recorder's office. The lien makes it challenging to sell or refinance the property. It must be paid off before the property can change hands. If the debt remains unpaid for a length of time, the contractor can file a lawsuit to enforce the lien and ultimately foreclose and sell the property to get their money. Laws and the specific process regarding mechanics' liens vary by state.

Mold Inspection

A mold inspection is a professional evaluation of a property to identify the growth of mold within a building. It may also include specialized testing to determine the source of the mold and identify how moisture is entering. A qualified inspector checks for signs of mold, like stains and musty odors, and uses tools like moisture meters and thermal imaging to detect dampness. They may also collect air or surface samples to bring back to the lab for analysis to determine the type and concentration. The goal of a mold inspection is to identify the extent of the mold problems and recommend appropriate steps for fixing the water issues and removing the mold to improve the indoor air quality.

Mortgage

A mortgage is a loan from a bank, credit union, or other type of financial institution used to purchase real estate. The borrower uses the property as collateral for the loan, and if they default on the loan, the lender can foreclose and sell it to get their money back. Borrowers must go through a lengthy and detailed approval process to qualify for a mortgage. Once they buy the property, borrowers must pay both principal and interest monthly on the loan. The lender will also require that you escrow property taxes, insurance payments, and sometimes private mortgage insurance (PMI) into the monthly fee. Once you pay off the mortgage, the house is yours, and the lien will be removed.

Multi-Family Home

A multi-family home is a single building that includes multiple residential living units that families or individuals occupy simultaneously. Some common types are duplexes (two units), triplexes (three units), condos, townhouses, and small apartment buildings with separate living spaces, kitchens, baths, and bedrooms for each family. Investors buy multi-family properties to increase their income by renting to tenants or allowing them to own their units and pay extra expenses on top of that. These types of housing units are often found in more densely populated urban or suburban areas, serving a larger number of people and making the units easier to rent out or sell. These units share common areas like driveways, gardens, lawns, gyms, pools, and hallways.

Non-traditional Tenure

With real estate, non-traditional tenure refers to unique property ownership or occupancy arrangements that don't line up with standard freehold or leasehold rules. It often involves owning a building that sits on land that you rent from the owner. Mobile homes and houseboats are good examples of this. Other examples include community land trusts and cooperatives. These arrangements offer alternative models for long-term, secure, and affordable housing through community ownership, rather than requiring a single individual to fund it themselves. Non-traditional tenure options require non-traditional mortgages, which may include interest-only terms, balloon payments, or hybrid ARMs. Self-employed individuals or those with irregular income often utilize these financial tools for their homeownership.

Occupancy Permit

An occupancy permit, also known as a Certificate of Occupancy (CO), is a formal legal document issued by the local building department that certifies a building is safe for habitation and use in accordance with its intended purpose. After renovations and before new construction can be occupied, the owner/builder must obtain a certificate of occupancy, allowing occupants to move in. The CO verifies that the building complies with all local building codes and zoning ordinances. To obtain one, you must complete an application and allow the local building office to inspect the property's structural integrity, electrical and plumbing systems, as well as safety features, to ensure it meets the standards. Utilities cannot be turned on until you obtain the CO.

Owner-Occupied

An owner-occupied property is a house in which the owner resides. Typically, it is their primary residence and is not being rented out. When lending money, banks prefer owner-occupied properties. They will offer borrowers lower down payments, lower interest rates, and better terms because they are considered more stable and less risky than tenant-occupied (investment) properties. Some lenders require that the property be owner-occupied; otherwise, they may refuse the loan. Anyone who misrepresents a property as owner-occupied (when it is a rental property used for investment purposes) can be charged with a criminal offense and face severe penalties. A property can be mixed-use, meaning the owner occupies it but may rent out spare rooms.

Parking

Regarding real estate, parking refers to deeded, underground, or reserved parking spaces, or the parking ratio (the number of parking spaces per unit) for a leased building. Parking can also serve as an additional revenue source for a property owner. When it comes to a property's desirability, tenant satisfaction, and revenue generation, the type and amount of parking matter tremendously. Parking can be influenced by local zoning laws, which may dictate the number of parking spaces required or limit the number that can be accommodated. Deeded parking means the owner of the unit also legally owns the parking spot. This is a common situation found in condominiums. The owner could potentially lease or sell their parking spot to another owner.

Peppercorn Rent

Peppercorn rent refers to an Old English common law where a tenant and landlord exchange something of value, like a peppercorn, in "consideration" of the contract. This practice ensures that the legal contract is valid. In the present day, it refers to an extremely low rent that is far below market value and is typically used when an owner leases to a non-profit organization. Peppercorn rent is a nominal fee used symbolically for land and property law in England and other Commonwealth countries. It can also be found in lease extension agreements, where the leaseholder pays a premium for the extension and agrees to a peppercorn rent for the remainder of the lease, which can last for 99 years.

Plumbing Inspection

A plumbing inspection is a thorough assessment of a building's entire plumbing system. It is performed by a professional experienced plumber to identify any existing and potential future issues before they cause major problems. The inspection involves a visual examination and a camera inspection of pipes, water pressure, fixtures (such as sinks, toilets, faucets, and tubs), and an evaluation of the water heater. The goal of the plumbing inspection is to identify leaks, clogs, corrosion, or failing components early, thereby preventing costly water damage and extending the life of your plumbing system. Before purchasing a property, it is crucial to have a thorough plumbing inspection to avoid costly issues. Homeowners can gain peace of mind by having regular plumbing inspections.

PMI (Private Mortgage Insurance)

When you borrow money for a mortgage, the lender may require private mortgage insurance, a specific insurance policy that protects the lender in the event of non-payment of mortgage payments. It does not benefit the homeowner/borrower, only the lender. Most lenders require it when the down payment is less than 20% of the home's purchase price. You make PMI payments in addition to your principal and interest payments. Once you build enough equity in your home (usually 20% of the home's value), you can request that the lender remove the private mortgage insurance. Some types of loans do not offer the option of removal (like FHA). You must factor in PMI when determining your housing total costs.

Pre-Approval

When applying for a mortgage to purchase a property, one of the steps in the process is obtaining pre-approval. It involves providing the lender with some information, and they will provide you with a pre-approval letter, tentatively confirming that they are willing to lend you the money as long as you comply with some contingencies. The lender will then need to verify your income, assets, and credit score (via a credit check) to ensure the information you provided is true and accurate. They may collect various documents during this process and ask for updated information as you near closing. A pre-approval letter strengthens your offer to sellers and shows that you are credible and serious about buying.

Pre-Foreclosure

Pre-foreclosure property is one of the earliest stages of the foreclosure process. It begins when a homeowner misses three consecutive mortgage payments (or three months of missed payments). The lender will issue an official Notice of Default alerting the homeowner that they intend to proceed with foreclosure. The pre-foreclosure period includes a grace period, allowing the homeowner to pay off the debt and bring their loan payments up to date. If they do, the foreclosure process will cease. If they do not, the lender will eventually post notice of the sale in the local newspaper and hold an auction, selling off the house to the highest bidder to get their money back. Foreclosures can be judicial or non-judicial.

Price

In real estate, the price refers to the amount a buyer is willing to pay to own a property. The fair market value is what the house is worth in the current market, but the price is the actual amount of money that the home sells for. The price varies based on the property's location, amenities, size, and condition. Even though the selling price may be one price, after the inspection, if any issues are found, the buyers may negotiate a lower price, and they will pay a different amount from the original. The listing price is the "asking" price, but most sellers are willing to negotiate. With multiple offers, the house may sell for more than the asking price.

Primary Residence

Many people own multiple properties. Their primary residence is where the family or individual lives the majority of the year. It is sometimes referred to as the principal residence. Lenders and tax authorities, such as the IRS, classify properties as a primary residence, as this classification affects mortgage rates, loan terms, and taxes. For example, you can deduct mortgage interest and capital gains exclusion only on your primary residence, but not on any additional residences, such as investment properties. Banks favor primary residences and offer more favorable loan terms, interest rates, and other benefits to homeowners with primary residences. Your primary residence is your official address, where you receive your mail, and it is listed on your driver's license.

Private Rights of Way

Private rights of way are legal rights granted to specific individuals, companies, or others to pass through a defined portion of another person's private land for a particular purpose. An example would be wireless towers or utility poles on private land. The landowner may grant the company or town the right to access the land to service the towers. The general public cannot legally travel onto the property, but the person/company with the private right of way can for the express purpose of tending to their equipment. The land still belongs to the rightful owner, but those with limited use rights can access it as needed. These private rights of way are mentioned as an easement in the property's deed.

Property Tax

Every property in the U.S. has a value, and local governments perform assessments to determine the value and set tax rates. They then bill the homeowner annually (usually in two installments) for the property tax. Property taxes fund city or county expenses, including schools, emergency services (such as fire, EMTs, and police), road maintenance, bridges, snowplowing, public parks, and recreation. States set tax rates and allow each individual municipality or county to perform assessments, bill for, and collect taxes, and then disburse them. Property tax rates vary widely across the U.S. and even within an area based on the property's size, location, amenities, and other factors. Some areas cap the amount of property tax that can be billed each year.

Public Rights of Way

Public rights of way are strips of land where the general public or public entities have the right to pass through or use (for a specific purpose) a section of private land. These rights of way may include roadways, sidewalks, or utility corridors. The owner retains the land while enabling municipalities or utility companies to maintain the area's infrastructure without owning the land. The utilities can access the land to install, modify, or repair equipment only. An example would be a short road that passes over private land to access a waterway, such as a pond or lake, for fishing and swimming. The public can use the road to pass, but not trespass on any of the other land.

Quitclaim Deed

A quitclaim deed is a specific type of deed in which one person transfers ownership of a piece of real property to another without any warranty or protection. They are legal documents that do not guarantee the validity or quality of the title, nor do they provide a warranty that the title is clear of liens or other claims. The grantor is the person transferring or selling the property, and the grantee is the person receiving or buying the property. Quitclaim deeds are most commonly used when transferring property between family members or as part of a divorce settlement. Because they offer very little protection, they should only be used in low-risk situations, such as gifting property.

Radon Test

A radon test measures the concentration of radon, an odorless, radioactive gas that can enter a home from the soil and water, posing a health risk. They are typically performed during the sale of a home. The buyer has the legal right to test the property before purchasing to determine if it has radon. A radon test is performed using DIY kits or professional monitors to detect radon levels measured in picocuries per liter (pCi/L). Some states are known for having high levels of radon. Some steps for mitigation are sealing cracks or installing systems to reduce the levels within the home. There are two types of radon tests: short-term and long-term, which utilize active and passive devices.

Real Estate Investment

Real estate investors purchase land, buildings, or a combination in the hopes of making a profit. Some buy houses to fix up and flip, then sell. Others purchase residential or commercial property and rent it out, generating ongoing income. Overall, real estate tends to appreciate, making some investments very lucrative. Multi-family dwellings such as apartment buildings, duplexes, and condos can be a very sound investment, generating large sums of rental income. However, investors are responsible for the maintenance and management of rental properties. Some investors purchase shares in Real Estate Investment Trusts (REITs) to own a piece of a larger investment shared by others. It allows them to reap the rewards without having to perform hands-on management duties.

Refinancing

Refinancing real estate involves replacing your current mortgage with a new one, aiming to secure better terms, a lower interest rate, or a cash payout from the home's equity. When refinancing, you must go through a lengthy application/approval process (similar to the one used with the original mortgage). Your new mortgage company will pay off the old loan and replace it with the new loan. Once the loan closes, you must pay mortgage payments (principal and interest) to the new lender. Most often, homeowners refinance to lower their monthly payments or cash out some of the equity in the home for improvements or other expenses. Borrowers may also refinance to change the type of loan (e.g., FHA to conventional).

Renovation Permit

Before renovating, you most often need a permit, which is approval from the local government (city or county) to perform the work. The permit ensures that the work complies with all building codes and safety rules to keep people safe and ensure the building is structurally sound. Part of the permitting process is an official inspection from the building inspector. Structural, major electrical or plumbing work, adding new construction, and anything that requires blueprints requires a building permit. Cosmetic work like painting, new flooring, or replacing cabinets usually doesn't require a permit. There are serious consequences for performing work without a permit, including steep fines, the need to redo the work, stop orders, and potential resale or refinancing issues.

Rent

In real estate, rent refers to the payment made by the tenant to the landlord for use of the building, land, apartment, office space, or other property. Typically, rent is paid monthly along with other expenses such as utilities, laundry service, and other special assessments. A lease is a contract made between the landlord and tenant for a specific amount of time (usually 12 months), and the rent is the payment made under the terms of the lease. In exchange for paying rent, tenants expect a decent, clean, and safe place to live/use. The landlord is responsible for maintenance and repairs of the space, or the tenant can withhold rent (in some states) until they fix what is broken.

Rental Yield

Rental yield is the annual rental income of an investment property divided by its fair market value (FMV). It is expressed as a percentage, and this metric serves to illustrate the property's profitability. Gross rental yield calculates the income before any expenses, and net rental yield takes the net figure (income minus expenses) to calculate the profit. Net rental yield is a more realistic figure showing the actual profit potential of the property. Calculate the rental yield by first taking the annual rental income, then multiplying the weekly or monthly figure by 52 (for weekly) or 12 (for annual), and finally dividing the result by the purchase price or market value. Multiply the remainder by 100 to obtain the percentage.

REO (Real Estate Owned)

Real estate owned (REO) refers to property that a bank or lender has acquired after foreclosing on it, and it failed to sell at the auction. In some cases, the bank will bid as high as the outstanding loan balance. If they are the highest bidder, they win and own the property, and it becomes REO. Once they take ownership, they can then sell it privately or in another auction. REO properties are typically sold "as-is" without any warranty or guarantee of the condition. You can find REO properties that are priced well below market value due to the risk. REO properties generally come with a clean title as the lender pays off any liens or loans before selling.

Reserve Price

In a real estate auction, the reserve price is the minimum price a seller is willing to accept for the property, meaning even if the highest bid is below the reserve price, the property will remain unsold. Since many houses are sold due to foreclosure, this threshold protects the lender/bank, ensuring they do not lose money below a specific value, thereby allowing them to recover their investment. It also serves as a benchmark for bidders, so they know how much they need to bid to win. If the highest bidder does not meet the reserve price, the seller can refuse to sell. Upon which, the seller may choose to withdraw from the auction or relist it at a later time.

Rights and Restrictions

With real estate, rights are a "bundle of rights" or privileges a property owner has, like the right to possess, control, use, exclude, enjoy, and sell their property. Restrictions are limitations on those rights which can come from the government (e.g., zoning laws), private agreements (deed restrictions, restrictive covenants, or easements), or the government's power of taxation or eminent domain. The government can restrict property through PETE (police power, eminent domain, taxation, and escheat). Other factors, like fair housing laws (e.g., Fair Housing Act), environmental regulations, and mortgages and liens, can also restrict property use. A property owner's rights are the legal entitlements associated with owning real estate. Restrictions are limitations that reduce or qualify the owner's bundle of rights.

Rights of Way

A right-of-way (ROW) is a legal right granting someone permission to use a portion of another person's private property for a specific purpose. An example would be access to a road on private property to install or maintain public utilities. The utility company doesn't need to own the land or ask permission once they have the right of way. Rights of way are documented through property deeds. They may be used for transportation, infrastructure, utilities, or private entities that need to service the property. The original landowner retains title to the property, but the ROW limits their use of the land. ROWs are not land ownership. There are public rights of way and private rights of way.

ROI (Return on Investment)

Return on investment (ROI) refers to the profitability of a property. It measures the cost of the real estate, expenses, and how well the property's income, appreciation, and tax benefits compensate for the expenditure. The ROI shows the percentage of profit an investor receives over a specific period of time relative to their initial investment. Investors use an ROI to determine the efficiency of their real estate holdings. The figure is expressed as a percentage. A typical ROI formula is as follows: (Total Profit - Total Costs) / Total Investment x 100%. The ROI allows investors to compare the profitability of different properties and investment types, helping them make informed decisions. ROI calculations can track performance to identify areas for improvement.

Second Home

A second home is in addition to your primary residence. They are typically used for vacation, weekend visits, or a part-time residence. The IRS has specific rules for classifying a property as a second home. For example, you must use it for at least 14 days a year, and it must be a minimum distance from your primary residence. The IRS also limits the rental income you can earn using your second home. Mortgages for second homes require larger down payments (10-20%) and have higher interest rates. Sometimes, second homes can provide a tax deduction as long as they meet certain conditions. Rules for investment and rental properties differ from those that you buy for personal use.

Security Deposit

When renting or leasing property, the landlord usually requires a security deposit. The tenant pays a security deposit to cover any potential damages to the rental property or unpaid rent when the tenant moves out. Security deposits are typically equal to one month's rent, and they are held in escrow until the tenant moves out. Once the landlord inspects the premises for any damage and all outstanding rents are paid, the landlord will refund the security deposit to the tenant. If there are any outstanding utility bills or damage beyond normal wear and tear, the landlord can use the security deposit to cover these expenses. If the place needs to be professionally cleaned, they can use it for that too.

Seller Disclosure

A seller disclosure is an official document that the seller of a home fills out to inform potential buyers about any "known defects" or issues with the property that could affect its value or safety. It is a legal document that provides transparency during a real estate transaction and helps buyers make an informed decision. It also protects the seller from future lawsuits because they revealed all known problems in advance. Seller disclosures vary widely from state to state. Certain areas cover some things that are not required in others. Generally, they include structural issues, mechanical systems (plumbing, electrical, HVAC), environmental hazards, a history of repairs made, and any other adverse conditions about the property that could lower the value.

Share of Freehold

In terms of real estate, a share of freehold is a property ownership structure where leaseholders jointly own the freehold title to a building. It provides each owner with collective control over the property and eliminates the need for a landlord. The arrangement usually means that each lessee owns a unit within the building but does not have to pay rent for it. Each owner also owns shares in a management company (as managers and directors), allowing them extended lease terms and shared responsibility for maintenance and costs. Leaseholders enjoy more control over the environment, reduced expenses, and shared commitment to make decisions about the future of the building. Meanwhile, each of them owns a share of the property.

Shared Ownership

Shared ownership refers to multiple owners of a single property. Joint parties purchase and co-own property to split the purchase price, expenses, and responsibilities. Shared ownership may involve family members, spouses, siblings, friends, or even investors who want to purchase a property and share the costs and use. Shared ownership usually involves two or more individuals who hold a specific percentage of the shared title. A legal document outlines each owner's rights, responsibilities, and financial commitments to the other. With more people owning the property, it can potentially be paid off earlier, building quick equity, and can allow them to buy more expensive property in desirable locations. It is most common in investor situations and shared vacation homes.

Short Sale

When a homeowner cannot pay their mortgage payments, before defaulting altogether on the loan and the bank taking the home in foreclosure, the lender may offer to help with a short sale. This is when the lender assists by marketing and selling the house for the amount of the outstanding loan. It allows the homeowner to avoid foreclosure (and damage to their credit) while also getting out from under the financial obligation. However, the downside is that they lose their home. A short sale works well for the lender and the homeowner. It is a voluntary approach to fixing the homeowner's financial problems. Short-sale homes are desirable to investors because they typically sell for less than fair market value.

Single-Family Home

A single-family home is a stand-alone structure situated on a private lot with independent utilities and no shared walls, roofs, or foundations. The homeowner owns not only the buildings but also the land they sit on. Some characteristics of single-family homes are a single kitchen and private access. A single family or individual generally occupies them. These dwellings have their own plumbing, electrical, heating, and cooling systems that are not shared with any other residences. In some cases, a townhouse or row house can be considered a single-family dwelling if it is separated from the neighbors by a ground-to-roof wall and has its own utilities, even though it may be connected to other homes.

Squatter

A squatter is a person who lives on or occupies a property without the owner's legal permission, such as a vacant house or abandoned building. Squatters do not pay rent or property taxes. It is most common among homeless Americans, but it is a form of trespassing and considered a crime. The laws regarding squatters vary widely from state to state, and removing them involves a legal process often requiring an unlawful detainer lawsuit. Unlike vandals or thieves, squatters intend to live on the property for a period of time. They target empty, unused, or neglected properties that no one will miss. These individuals do not have a lease agreement, nor do they own the property they are squatting on.

Staging

Staging is a marketing tactic used when selling a piece of property. It involves decluttering, depersonalizing, cleaning, rearranging furniture, and adding stylish items to present a welcoming environment and make the house more attractive. It is designed to make the space more appealing so that potential buyers can visualize themselves in the space. Staging involves removing personal belongings and photos, minimizing furniture and fixtures, and using higher-quality items to create a more open and inviting space. It may also include painting, using natural light, and introducing neutral colors to accentuate the property's positive features and attract a broader range of buyers. Staging can be very impactful and could lead to higher offers or a higher asking price.

Structural Integrity

The structural integrity of a house or building refers to its ability to withstand loads and forces applied to it, such as its own weight, furniture, people, and environmental factors like wind, rain, snow, and ice, without collapsing or becoming unsafe. Structural integrity depends on the building's materials, construction methods, and components like foundation, roof, and framing. These items need to be strong and properly connected to ensure the safe transfer of loads from the roof to the foundation and to resist external stresses over the structure's lifespan. Inspectors will evaluate its load-bearing capacity, continuous load path, proper construction, stability, and material strength to determine its integrity. Regular inspections and maintenance of problem areas (like cracks) ensure structural integrity.

Subprime Loan

A subprime loan is designed to help individuals with low credit scores or a poor credit history who may be high risk. Lenders offer these loans to people who cannot get conventional loans, but due to the increased risk, they charge much higher interest rates and less favorable terms. Those who qualify for a subprime loan are individuals with a recent history of missed payments, bankruptcies, or limited credit history. Typically, borrowers of subprime loans have a credit score of 600-670 or less. They may also have a high amount of debt compared to their income. Banks may also charge higher fees and have stricter down payment requirements. Sometimes these loans are called "near-prime" or "deep subprime".

Tax Lien

Local county tax assessors value each property within its district every year for tax purposes. Then the county tax collector/treasurer sends out bills to property owners. Bills are typically split into two payments, due six months apart. Homeowners are responsible for paying their property taxes on time. If they fail to pay, the county or city can impose a tax lien on the property, along with late charges and other fees. A tax lien is very serious, and if it remains unpaid for too long, the taxing authority may foreclose on the property and sell it at auction. Anyone having trouble paying their taxes should contact the local tax office to work out a solution before it's too late.

Tenancy Length

When tenants rent property from landlords, the tenancy length is the amount of time the tenant is allowed to occupy or use the property as outlined in the lease or rental agreement. A tenancy length can be fixed (e.g., one-year term) or indefinite (month-to-month agreement). The tenancy length is a key component of the rental contract, and it defines when the tenant can take possession of the property and when they must vacate it. Some contracts include a "tenancy at will" without a termination date. In this case, either party (tenant or landlord) can terminate the agreement in writing at any time. Tenancy length is legally binding within the contract and can be legally enforced if necessary.

Tenant

A tenant is an entity or individual that rents out and occupies or uses a property. Their tenancy is based on the rental or lease agreement with the landlord (property owner). The tenant pays rent in exchange for the right to use the property. Each state dictates tenant rights, and most have strict laws about providing safe and habitable living spaces, and the right to privacy. In return, the tenant must pay their rent and other fees on time. Landlords can use a screening practice to get the most reliable, responsible, and best-fit tenants possible. All of the rights and responsibilities of both the tenant and landlord are outlined in the lease agreement or contract, which is legally binding.

Tenant-Occupied

A tenant-occupied property refers to one where a renter is living. The tenant leases the space from a landlord, according to a rental or lease agreement, which seals the deal. Tenant-occupied means that the property is not vacant or that the owner is not residing on the premises. Buyers of tenant-occupied properties must respect the existing lease agreement and all state-dictated tenant rights. These rules may impact property access, condition/maintenance, and the ability to occupy the space after closing. In most cases, the tenant will be able to stay until their lease agreement is up. Buyers essentially inherit the seller's lease agreements and take on the role of landlord in place of the previous owner.

Termite Inspection

When purchasing property, some buyers will order a termite inspection. The termite inspection is a thorough examination by a professional to find evidence of termites or other wood-destroying pests. They look for signs like mud tubes, discarded wings, damaged wood, and water damage. They use a metal probe to check for softened, hollowed-out, or weakened wood. Inspectors look for both current infestations and conducive conditions, such as high moisture or wood-to-soil contact, that could attract future infestations. Termites can be very damaging to property, and it is costly to fix the problem. A termite inspection can detect any issues early and save the buyer money. Some lenders require a termite inspection when approving a mortgage.

Title

Title refers to the legal right of ownership to a property. The word title refers to a concept, not a legal document. The title allows someone to possess, use, and transfer the property at will. The title includes a "bundle of rights" that proves ownership. Title is documented through property deeds, which are most often stored and maintained through the county recorder's office or town clerk. Deeds transfer ownership from one party to another during the sale or gifting of property. A clear title indicates that the property is free from any ownership disputes and encumbrances and can be sold or transferred without any issues. Title defects occur when ownership is in question or when there are encumbrances on it.

Title Insurance

Title insurance is a type of insurance used during real estate sales. It protects the real estate owner/buyer and their lender from financial losses due to title defects or claims against the property after the sale. If someone claims they own the property and can prove it, and if the owner has title insurance, they can use that to recoup their losses. When taking out a mortgage, the lender will almost always require that the borrower purchase title insurance to protect their investment. Title insurance can also protect against fraud, forgery, unknown liens, unpaid taxes, undisclosed easements, or improper public record filings that may have been missing during the initial title search. Title insurance covers the period before the sale.

Title Search

A title search is a thorough examination of public property records to confirm the legal ownership of a property before it is sold or transferred. It effectively establishes the complete ownership history of the property. The search looks for things like outstanding claims, liens, easements, rights-of-way, or other encumbrances that could affect the property's title after the sale. Defects found during the title search may include unpaid mortgages or property taxes, judgments, or mechanics' liens. Typically, a title company or real estate attorney performs the title search, verifying that the seller has the legal right to sell the property and that the buyer will receive a clear, marketable title, protecting them from future legal claims against the property.

Townhouse

A townhouse is a multi-story single-family home that shares one or two walls with adjacent properties in a row. Townhouses have their own private entrance and indoor amenities, but it is situated on a piece of privately owned land. They typically have more space and privacy than an apartment, but less exterior maintenance than a single-family home. The owners belong to a Homeowners Association (HOA), which manages the community amenities and takes care of maintenance. Owners pay monthly for shared services like ground maintenance and snow removal. Unlike condos, townhouse owners usually own the interior, exterior, and land their unit sits on. Each unit is attached to neighboring homes shared by at least one common wall.

Transfer Tax

When property changes hands through a sale, the state, county, or local government charges both the buyer and seller a transfer tax. Depending on the location, it can be called different things. For example, in some states, it is called Real Estate Transfer Tax (RETT). Sometimes it is called "tax stamps." The tax is based on a percentage of the purchase price and charged at the time of closing. The title company or real estate attorney handling the sale will factor it in and pay the tax after closing. Paying the tax covers the cost of recording the sale with the local government. Only a few states, like Alaska, Arizona, Idaho, Mississippi, and Utah, do not have a transfer tax.

Turnkey Property

A turnkey property is a piece of real estate that is in excellent condition, with no updates or maintenance required to move in or rent immediately. Usually, these properties have been recently renovated, repaired, or updated and may come with a professional property management service, allowing investors to generate income with minimal effort or time expenditure. Turnkey properties are designed for passive investors seeking immediate cash flow and a hands-off approach while the management company handles all the necessary paperwork. They get the property ready for use whenever an old tenant moves out. These properties can be used immediately after purchase. The third-party property managers handle day-to-day operations (finding tenants, collecting rent, and addressing maintenance issues).

Type of Tenure

Types of tenure refer to property ownership and use. They include freehold, where you own the property and the land indefinitely and have full rights to possess, occupy, use, mortgage, and sell the property. Leasehold is where you have ownership for a fixed period of time, but don't own the land or the building(s). After the lease, ownership reverts to the original owner. Less commonly, there is a commonhold, where an in-between option exists for flats or apartments where individuals own their own unit but share common ownership of the building (hallways, exterior areas, outside amenities). Other types of tenure exist as well, such as owner-occupied, social renting, private renting, and cooperative ownership (residents can occupy specific units).

Utilities

Utilities, as they relate to property, refer to essential services like water, electricity, heating, sewer, and internet. These vital services make a property functional and livable, adding crucial value to the property. In some cases, when a landlord rents out a unit, they may include utilities in the package to make it more desirable. That means the renter pays their monthly rent but doesn't have to pay extra for utilities. When advertising new properties, landlords may accentuate these services as part of the package to attract and retain good tenants. This helps with demand and potentially higher rental income. Properties that do not include these basic services are impractical, inconvenient, and unusable for both commercial and residential use.

Vacant Property

A vacant property is a piece of real estate that is empty, unoccupied, and not in use for its intended purpose. The property lacks a tenant or resident. Sometimes the vacancy lasts a long time (30-45 or more days). In some cases, all the furniture and fixtures have been removed by the owner or criminals. Vacancy applies to both commercial and residential properties (both land and buildings). Reasons for vacancy include in between sales, renovations, new builds, or abandonment. Vacant properties can present challenges for owners, such as increased insurance costs, potential for criminal activity, and requirements for registration and maintenance to prevent them from becoming a public nuisance. Abandoned properties often attract homeless individuals or vagrants.

Warranty Deed

A warranty deed is a legal document used in real estate transactions to transfer ownership from the seller (grantor) to the buyer (grantee). The warranty deed guarantees the buyer a clear title free from any defects like outstanding claims or encumbrances except for those explicitly mentioned in the deed. A warranty deed offers the highest level of protection, making several promises (covenants) to the buyer regarding the property's title, including that the seller has the right to convey the property, the existence of the title, and protection against any future claims. Essentially, the seller promises to defend the buyer against any future claims to the title. Additionally, the grantor will take necessary actions to fix any title issues that exist.

Zoning Permit

A zoning permit is a legal document that allows a property owner to commence development or projects related to the property's location. Local governments enact zoning laws about how land can be used. When building new construction, developers must obtain a zoning permit to ensure that the project complies with the municipality's land-use regulations. Additions, renovations, and other changes in property use may also require a zoning permit. Zoning permits affect the type (residential, commercial, industrial), building size, height, number of stories, location, type, and other factors. An example would be a setback (how close the building can be to property lines). Some zoning laws dictate aesthetics and other aspects to ensure compatibility of new developments within existing areas.