Tools
Real estate glossary
The terms that come up between the first showing and closing, in plain words.
- Appraisal
- An independent estimate of a home's value, ordered by the lender, that the loan amount is checked against.
- Appraisal gap
- The difference between the contract price and a lower appraised value; the buyer covers it in cash unless the contract says otherwise.
- Attorney review
- A short period after a contract is accepted, customary in Illinois, in which each side's attorney may propose changes or cancel.
- Closing
- The meeting, or the day, when documents are signed, funds move, and ownership transfers.
- Closing costs
- Fees and prepaid items paid at closing beyond the purchase price: lender fees, title, recording, taxes, attorney.
- Comparable sales (comps)
- Recently closed homes similar in size, condition and location, used to set a price or support an appraisal.
- Contingency
- A condition in the contract that must be met for the sale to proceed, such as financing, inspection or appraisal.
- Days on market (DOM)
- The number of days a listing has been active before going under contract.
- Debt-to-income ratio (DTI)
- Monthly debt payments divided by gross monthly income; lenders cap it to size a loan.
- Disclosure
- The seller's written statement of known defects and conditions, required by law.
- Down payment
- The part of the price paid in cash rather than borrowed.
- Earnest money
- A deposit made with the offer to show commitment, held in escrow and applied at closing.
- Escrow
- Money held by a neutral third party: earnest money before closing, or the tax and insurance reserve the lender collects with each payment.
- Equal Housing Opportunity
- The federal guarantee that housing is available to everyone regardless of protected class, under the Fair Housing Act.
- HOA / assessment
- A homeowners' association fee for shared property and services in a condominium or planned community.
- Inspection
- A buyer-ordered examination of a home's condition and systems, usually within days of an accepted contract.
- Interest rate lock
- A lender's commitment to hold a quoted rate for a set period while the loan closes.
- List price
- The asking price on a listing; the sale price is what a buyer actually pays.
- List-to-sale ratio
- Sale price divided by list price; a measure of how close to asking homes are closing.
- MLS
- The multiple listing service: the database brokerages share to market and find listings.
- Pre-approval
- A lender's conditional commitment based on verified documents; stronger than a pre-qualification, which is based on stated figures.
- Principal and interest (P&I)
- The part of a mortgage payment that repays the loan and its interest, before taxes and insurance.
- Private mortgage insurance (PMI)
- Insurance the borrower pays when the down payment is under 20%, protecting the lender.
- Proration
- Splitting a cost such as property tax or HOA dues between buyer and seller according to the closing date.
- Title
- The legal right of ownership; title insurance protects against claims and defects in it.
- Transfer tax
- A tax on the sale of real estate charged by the state, county, or municipality, computed on the price.
- Under contract
- A listing with an accepted offer that has not yet closed; contingencies may still be open.
- Walk-through
- The buyer's final visit before closing to confirm the home's condition and agreed repairs.
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