Real Estate Glossary
Real estate conversations often include terms that are familiar to agents, lenders, and attorneys, but not always clear to buyers and sellers. This glossary explains common real estate, financing, offer, and closing terms in plain language so you can feel more informed at each step of the process.
Mortgage & Financing Terms
- Pre-qualification
An estimate of what a buyer may be able to borrow based on limited financial information disclosed to the lender without financial document review or lender commitment. - Pre-approval
A lender commitment for a loan amount which is based on the submission of financial documents of income such as a W2, in addition to a detailed credit review and verification of assets, and debts. - Proof of funds
Documentation showing that a buyer has enough available cash for a purchase, down payment, or closing costs. - Down payment
The portion of the purchase price the buyer pays upfront, separate from the loan amount. - Earnest money deposit
A deposit submitted with or shortly after an offer to show the buyer’s good faith. It is typically held in escrow. - Mortgage contingency
A clause allowing the buyer to withdraw from the agreement if they cannot secure financing by a certain date. - Appraisal
A lender-ordered estimate of a home’s value to confirm that the property supports the loan amount. - Appraisal gap
The difference between the agreed purchase price and the appraised value if the appraisal comes in lower than expected. - Debt-to-income ratio
A lender’s calculation comparing a buyer’s monthly debt payments to their income. - Rate lock
An agreement with a lender to hold an interest rate for a specific period of time. - Closing costs
Additional expenses due at closing, such as lender fees, title costs, recording fees, escrows, and prepaid taxes or insurance.
Buyer Terms
- Inspection contingency
A clause allowing the buyer to inspect the property and negotiate, request repairs, or withdraw depending on the agreement terms. - Home inspection
A professional review of the property’s condition, often required by lenders including structure, systems, roof, plumbing, electrical, heating, cooling, and safety concerns. - Due diligence
The buyer’s period of investigation before fully committing to the purchase. - Purchase and Sale Agreement / P&S
The final detailed contract signed after an accepted offer, setting out the final terms that must be followed by both parties before closing. This overrides any prior stipulations in the offer. - Escrow
The holding of funds to be applied at the completion of the transaction by a neutral party during the purchase and sale process. - Final walkthrough
The buyer’s last visit before closing to confirm the property is in the expected condition.
Seller Terms
- Market value
The price a qualified buyer is willing to pay based on current market conditions, comparable sales, location, condition, and demand. - Comparative Market Analysis / CMA
An agent’s analysis of similar recently sold, active, and pending properties to help estimate a home’s likely highest market value. - Home equity
The difference between the property’s current value and any outstanding mortgage or liens. - Seller disclosure
Information the seller provides about the property’s condition, history, systems, or known issues. - Staging
Preparing a home visually and strategically so it presents well to buyers. - Days on market / DOM
The number of days a property has been publicly listed for sale. - Multiple-offer situation
When more than one buyer submits an offer on the same property.
Offer & Negotiation Terms
- Highest and best
A request for buyers to submit their strongest final offer by a deadline. - Escalation clause
A clause stating that a buyer will increase their offer above competing offers up to a certain limit. - Waiver
When a buyer gives up a contractual protection, such as an inspection or financing contingency. - As-is sale
A sale where the seller does not intend to make repairs, although buyers may still have inspection rights depending on the offer terms. - Concession
Something one party gives to the other, such as a closing cost credit, repair credit, or price adjustment. - Seller credit
Money the seller agrees to contribute toward the buyer’s costs, subject to lender rules.
Property & Market Terms
- Comparable sales / comps
Recently sold similar homes used to help estimate a property’s value. - Assessed value
A value assigned by the municipality for property tax purposes. It is not always the same as market value. - Zoning
Local rules that govern how land and property may be used. - Setback
Required distance between a structure and property lines, roads, wetlands, or other boundaries. - Easement
A legal right for someone else to use part of a property for a specific purpose, such as access, utilities, or drainage. - Title
Legal ownership of the property. - Title search
A review of public records to confirm ownership and identify liens, claims, easements, or other issues. - Lien
A legal claim against a property, often related to unpaid debts, taxes, or contractor work. - Deed
The legal document transferring ownership from seller to buyer. - Survey
A drawing or report showing property boundaries, structures, easements, and other site details. - Title V inspection
In Massachusetts, an inspection of a septic system required in many property transfers. - Flood zone
An area identified as having flood risk, which may affect insurance, financing, and buyer interest.
Closing Terms
- Settlement statement / closing disclosure
A document showing the final costs, credits, deposits, loan amounts, and funds due. - Clear to close
A lender’s final approval allowing the transaction to proceed to closing. - Closing
The final step when ownership transfers from seller to buyer. - Closing date
The scheduled date when the transaction is completed. - Recording
The filing of the deed and mortgage documents with the appropriate registry of deeds. - Possession
The point at which the buyer has the right to occupy the property which occurs after the recording of the closing with the registry of deeds.
