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Glossary of Real Estate Terms
LEARNING THE LANGUAGE
Not all of the terms that REALTORS® and attorneys use in the context of buying, selling, or renting real estate are necessarily intuitive. To help you learn the real estate lingo, we have assembled a number of terms and phrases that you might come across.
AGENT
A real estate agent is a real estate professional who is licensed to buy, sell, or property. In Illinois, there are three types of real estate agents: managing broker (most education and experience required), broker, and leasing agent (least education and experience required).
APARTMENT
An apartment is a term generally used to describe properties that are not owned by an occupant.
ARCHITECT
A person or entity that is responsible for designing structures -- including buildings and homes.
ASSESSMENT
An assessment is an amount paid to an association for an owner's share of common costs.
ATTORNEY
Licensed by the Supreme Court of Illinois, an attorney negotiates contract details and repair issues. They are also trained to deal with the complexities of real estate transactions, which can include both legal and tax.
BILL OF SALE
A bill of sale is a legal acknowledgment that indicates that a seller has conveyed title to personal property to a purchaser. Appliances are considered personal property. When a home is sold and the appliances are included, a deed will cover the transfer of the real estate while a bill of sale will cover the transfer of the appliances, for example.
BROKER
In Illinois, the requirements for becoming a broker are more stringent than a leasing agent but not as stringent as a managing broker.
BROKERAGE
A brokerage is the company for whom a broker works.
BUILDER
A builder, who may or may not also be the developer, is the person or entity charged with the task of constructing improvements.
BUYDOWN
A buydown is a scenario where the buyer pays extra money at the inception of a loan to lower the long-term rate.
BY-LAWS
By-laws explain the operating procedures for an association.
CAPITAL IMPROVEMENT
This phrase is often used in conjunction with the sale of a condo or cooperative. A capital improvement commonly refers to an expenditure that is being made in an association, often for the greater good of all units (e.g., the installation of a new roof or elevators).
CLEAR TO CLOSE
This phrase refers to a letter whereby a lender confirms that they have examined the financial condition of a Buyer and have made a firm commitment to lend funds.
CLOSING
A closing is a process in which real estate is conveyed. During a closing, a Buyer pays money in exchange for a Seller conveying title.
CLOSING DSCLOSURE
A Closig Disclosure or a CD is a document produced by a lender in conjunction with the sale of real estate when financing is being used. In addition to all of the charges related to a deal, it gives a Buyer additional information about the terms of their loan (including interest rates, type of loan, payment amounts, etc.). It is produced by the Buyer's lender, when financing is being utilized.
COMMISSION
A commission is an amount paid to a party for the sale of real estate. A commission is typically negotiated by a Seller with the listing agent at the time when a listing agreement is entered into. When a property is listed in the MLS, the listing brokerage offers to pay some portion of that total commission to any broker who brings a suitable bueyr or tenant. The amount paid to the Buyer's brokerage is called a "cooperation commission".
CONDOMINIUM
A condominium or condo is a type of property in which many units share a common interest in a common area, though smaller subdivided parcels are used for occupancy by individual owners.
CONTINGENCY
A contingency is a provision in a sales contract that would excuse a party from failing to perform (i.e., close). For example, if a buyer has a financing contingency and is unable to procure a mortgage, the buyer will be allowed to escape the contract without penalty.
COOPERATIVE
A cooperative is a specific type of housing ownership where an owner acquires shares in a housing corporation, along with a proprietary use that grants exclusive use of a space. While common in places like New York, Chicago has fewer of them -- though they are more frequently found in older buildings along East Lake Shore Drive and Sheridan Road. Condominiums or "condos" are more prevalent in our Chicago market.
DEED
A deed is a legal document which conveys an interest in real property. In Illinois, only an attorney can prepare a deed (i.e., brokers cannot).
DECLARATION
DEVELOPER
The person or entity that was responsible for preparing a site for construction. The developer is often the person who has sought approval from any government entities that must approve plans for improvement.
DUAL AGENCY
Dual agency transactions are those in which a single broker represents both parties in a real estate deal.
EARNEST MONEY
Earnest Money is a deposit made by the buyer to demonstrate good faith to the Seller. When the property closes, the earnest money is applied to the purchase price and reduces the amount of cash that a buyer needs to close the deal.
ESCROW
ESTATE SALE
A sale that occurs upon the death of a titleholder.
EVICTION
An eviction is a legal process that a landlord undertakes to remove a tenant from a property, typically for the non-payment of rent or a violation of a lease's terms.
EXEMPTION
Exemptions are allowable deductions that reduce the amount of tax that is paid. Homeowners' exemptions are given to owners who occupy a property, though there are other types too -- including those for senior citizens and low-income seniors.
FHA MORTGAGE
FIXTURES
Fixtures are those items attached to real estate which are deemed to be permanently installed.
FORCIBLE ENTRY & DETAINER
See "eviction".
FORECLOSURE
Foreclosure is a process in which a lender with a secured interest in real estate exercises its right to take back a property due to non-payment under a secured note.
HARD LOFT
This refers to former industrial buildings that have been converted into alternative purposes, such as residential.
HIGH-RISE
A building that is 7 stories or higher.
HUD-1
Though largely unused these days, a HUD-1 was a specific form of a settlement statement that became largely unused since 2015, when the Consumer Financial Protection Bureau (CFPB) institued its new TILA-RESPA disclosures. More commonly used for settlement statements now is the ALTA Settlement (Combined) form.
INSPECTION
While there are many types of inspectinos that can be done
LANDMARK
LAWYER
See "attorney".
LEASE
A lease is short for a "leasehold estate", which is a type of rental interest in real estate that does not give ownership but instead possession.
LEASING AGENT
In Illinois, the requirements for becoming a leasing agent are the least stringent among real estate professionals.
LEGAL DESCRIPTION
While you may think of your house as being located at 123 Adams St., this is just the common address that is used to do things like deliver mail and packages. But common addresses don't tell you how much land there is, for example. The legal description is the official way that your property is identified, and it explains exactly what you own.
LIEN
LISTING AGENT
LIS PENDENS
A lis pendens is a formal notice that can be filed against real property that gives notice that a legal dispute exists which pertains to the real estate. A lis pendens is commonly filed when a mortgagee begins the process of foreclosing on a loan.
LOFT
LOW-RISE
A building that is 1 to 3 stories.
MANAGEMENT COMPANY
A management company oversees the operations of a building, so as to alleviate the workload for homeowners by and through their association.
MANAGING BROKER
A managing broker overseas the brokers who work in a real estate office. In Illinois, the requirements for becoming a managing broker are the most stringent among real estate brokerage professionals.
MID-RISE
A building that is 4 to 6 stories.
MLS
See "multiple listing service.
MORTGAGE
A mortgage is the collaterilzation of an asset to reasonably assure a lender of repayment. While folks commonly think that they "get a mortgage" when they buy a home, a buyer technically "gives a mortgage" to their lender in exchange for the borrowing of money from the lender.
MORTGAGE INSURANCE
Mortgage insurance is typically required when a Buyer puts less than twenty percent (20%) down.
MULTIPLE LISTING SERVICE
Commonly referred to as the MLS, this service maintains a database of properties that are currently listed for sale or lease. Having your property listed in the MLS is, in our estimation, the most important thing that your agent can do to market your real estate.
NEGOTIATOR
In short sale trasactions, a negotiator is an intermediary (often a third-party) who attempts to intervene on behalf of a selling borrower -- arguing that the lender should accept a lesser amount than what is owed.
ORDER FOR POSSESSION
An Order for Possession is a signed, written direction signed by a judge which establishes which party has the lawful right to occupy and use a property. These orders are granted at the conclusion of the judicial portion of an eviction proceeding.
PAID ASSESSMENT LETTER
a paid assessment letter is a statement from an association that confirms that all monies owed to it have been fully-paid. These are required when a property is a part of an association (e.g., a condo association or homeowners' association).
PENTHOUSE
A penthouse traditionally referred to the top floor of a building. These units typically offer the best views, and they may contain more highly-upgraded finishes when compared to other units in the building. Some developers will designate mutiple floors as containing "penthouses" (e.g., Trump Tower designates floors 86 to 89 as penthouse levels).
POWER OF ATTORNEY
A power of attorney is written authorization which allows one party to sign on behalf of another, as though the signer were themselves present.
PRE-APPROVAL
A pre-approval commonly refers to a letter issued by a lender after the cursory review of a buyer's finances. They generally indicate the terms under which a lender will loan money to a borrower.
PRE-QUALIFICATION
A pre-qualification is a very cursory determination made by a lender as to whether a buyer is qualified to obtaining financing for the purchase of property. Pre-qualifications may be issued prior to a lender checking an applicant's credit or documenting his/her income.
PROPRIETARY LEASE
In cooperative housing, a proprietary lease gives the shareholder of the housing corporation a right to exclusively use a particular unit.
REALTOR
A REALTOR® is a real estate agent who is also a member of the largest trade association for real estate agents, the National Association of REALTORS. Not all agents are REALTORS.
REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)
RENTAL AGREEMENT
See "lease".
RIGHT OF (FIRST) REFUSAL
A right of first refusal gives a party a right to purchase a property at the same terms as the highest bidder. Some condo associations (particularly those developed long ago) give an association a right to buy back a unit by way of a first right of refusal. In such cases, the association must waive its pre-emptive right before a sale can close.
RULES & REGULATIONS
In addition to a Declaration, an asssociation's Rules & Regulations outline obligations that owners and tenants must abide by.
SETTLEMENT STATEMENT
A settlement statement displays all amounts paid in conjunction with the sale of a property. Though the HUD-1 form was popular until the mid-2010's, more common today is the ALTA Settlement (Combined) form. Settlement statements are produced by the title company closing a deal.
SHORT SALE
A short sale is a particular type of sale transaction where the total proceeds from the deal are less than what it owed on the property. In these transactions, a request is made to "short" (to pay less than what is owed) a seller's lender. In short sale transactions, a rider is typically attached to the contract which makes the deal contingent about the third-party lender approving the terms of the sale and accepting a pay-off which is less than the outstanding balance.
SOFT LOFT
This refers to recently-constructed loft-style living (i.e., though these lofts may look similar, the space was not converted from a formerly industrial usage).
SURVEY
A survey is a graphical depiction of a property. It ordinarily shows all structures built on a parcel, including homes, garages, sheds, fences, etc.
TENANCY
Tenancy describes how a property is owned. Forms of tenancy incude: individual, tenancy in common, joint tenamcu, or tenancy by the entirety.
TITLE COMMITMENT
TRANSFER TAX
Transfer taxes are surchares imposed by a municipality in conjunction with the sale of real estate. While many areas charge only one party (a buyer or a seller), Chicago charges both sides. You can click here to see a comprehensive list of taxes in various Illinois municipalities.
TRUTH IN LENDING ACT
The Truth in Lending Act (TILA) of 1968 is United States federal law designed to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.
UNDERWRITING
While this term can also refer to the process of issuing a title policy, underwriting is most commonly used to refer to the process which is used by a lender to determine whether to loan money to a potential borrower (a buyer of real estate). Once the underwriting process is completed, the lender financing a purchase will issue a "clear to close."
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