US Real Estate Terminology

with UK Equivalents when possible

Agreement of Sale (UK Counterpart Contracts): A written document in which a purchaser agree to buy property, which the vendor agrees to sell, under certain conditions.

Acceptance: Agreeing to accept an offer on a property, this constitutes a contract.

Adjustable Rate Mortgage (ARM): A type of mortgage rate loan whose interest rate changes periodically up or down, usually once or twice a year. There are large number ARMs available from lenders nation-wide. Also called a ‘variable rate mortgage’.

Ad Valorem Tax: A tax based on the value of the property, i.e. property or real estate taxes.

Alimony (UK Child Support Payments): Regular and continuing payments made to an ex-spouse/partner.

Amortization: The gradual process of systematically reducing debt in equal payments (as in a mortgage) comprising both principle and interest, until the debt is repaid in full.

Annual Percentage Rate (APR): Everything financed in a mortgage loan package (interest, loan fees, points or other charges), expressed as a percentage of the loan amount.

APPRAISAL (UK Valuation): The professional examination of a property to determine its market value.

Assessments (Not recognized in UK): Special and local taxes imposed upon property which benefits from an improvement that has bee made in the area. See CDD.

Assessed Value: The value placed on a property for tax purposes by the county property appraiser. Unlike in many other countries (and US states), the assessed value in Florida should be equal to the actual market value.

Assumable Mortgage: A loan that the lender is willing to transfer from the current owner of the property to a new owner, possibly with same interest rate and terms. An Assumable loan may make your home more attractive to buyers when you want to sell.

Auto Pay (UK Direct Debit).

Balloon Mortgage: A loan with a large final payment.

Broker: See Real Estate Broker.

Buyer’s Agent / Broker: A real estate agent employed solely by the buyer and under obligation to obtain the best price and terms for the buyer.

Cap: The maximum rate by which an adjustable rat mortgage can change, either annually or over the lifetime of the loan.

Community Development District (CDD): Florida law provided for the establishment of community development districts (or CDDs), to pay for costly, up-front infrastructure needs. A CDD can obtain infrastructure financing through utilizing tax exempt district bonds. These bonds are repaid, usually over a 20 year period, through an annual property tax assessment.

CDDs are empowered to finance, build, operate and manage infrastructure and recreational facilities. CDDs are often used by master planned communities to build roads, water management, waste/sewer, schools, conservation areas, streetlights, bridges, parks, swimming pools, golf courses, security etc.

Closing (UK Completion): The final procedure in a property transaction when documents are executed and recorded, funds are disbursed and the title transferred from the seller to the buyer. A buyer can give the title company (or lawyer) power of attorney to attend the closing on his/her behalf. Also called settlement.

Closing Costs: Costs the buyer must pay at the time of closing in addition to the down payment, including the selling & buyer’s broker commission, points, mortgage, insurance premium, homeowners insurance and prepayments for property taxes and applicable community fees. Closing costs average around 5% of the purchase price. See Good Faith Estimate.

Closing Statement: A statement prepared by the Title Company (or lawyer) detailing the costs for both the seller and the buyer. See HUD.

Collateral (UK Security): A property given as security for repayment of a debt.

Commission (UK Procuration Fee): An agent’s fee for negotiating a real estate or loan transaction, often expressed as percentage of the purchase price or the loan amount.

Commitment Letter (UK Offer of Advance): A formal letter by the lender which states the terms under which it has been agreed to lend the money. Also known as a ‘loan commitment’. This letter will indicate the conditions that must be satisfied before release of funds.

Common Elements: The parts of a building housing a condominium or co-operative units that are not individually owned, in which all owners have an indivisible interest. Common elements usually include foyers, hallways, maintenance areas, parking lots, grounds, recreational facilities and the external structure of the building.

Community Association: An organization which a buyer must usually join when buying in a community development. Note that even single family home communities can have community associations. See HOA & CDD.

Condominium (Condo) (UK Flat): A building or development comprising two or more units (e.g. apartments or townhouses), the interior of which is individually owned. The common elements of the building (see above) are owned by all unit owners.

Contingency (UK Pre-Contractural Stipulation): A condition placed on an offer to buy or sell a home e.g. a prospective buyer may make an offer contingent on the sale of his present home.

Co-Operative (No longer a British Practice): A building or development comprising two or more units (e.g. apartments or townhouses) which is owned by a corporation usually made up of the owner/occupants. No real property is owned by individuals who own shares in the corporation (allocated to each unit according to its size) entitling them to use a certain dwelling, unit or space.

Conveyance: The act of transferring the title (ownership) of a property and also the document (such as a deed) used to transfer the ownership.

Credit Report: A report on an individual’s historic willingness and capacity to make payments in accordance with their loan agreements in the past.

Deed: A written legal document that conveys title to real property.

Deed Restrictions: A clause in a deed that restricts the use of land.

Discount Points: The amount paid to the lender at the time of the origination of a loan to account for the difference between the market interest rate and the lower face rate of the note (see also Point).

Down Payment (UK Deposit): The amount that needs to be paid in cash to obtain a mortgage, e.g. if you have an 80% mortgage, you must make a 20% down payment.

Earnest Money: Funds submitted with an offer to show good faith to follow through with a purchase. Earnest money is placed by a broker in an escrow (trust) account until closing, when it becomes part of the down payment or closing costs.

Easement: The interest, privilege or right that a party has in the land of another party e.g. utility line.

Encumbrance: Any right or interest in a property that affects its value such as outstanding loans, unpaid taxes, easements and deed restrictions.

Equity: The value an owner has in a property after the deductions of any outstanding liens such as mortgage, e.g. if a property is valued at $100,000 and the amount outstanding on a mortgage is $50,000, the owner has $50,000 equity.

Equity Loan: A second mortgage where the owner borrows against his equity in a property.

Escrow: A procedure in which documents of cash and property are put into the care of a third party, other than the buyer or seller, pending completion of agreed conditions and terms in sales contracts. An escrow company (title) performs escrow services.

Escrow Fee: Fee charged by the escrow company for handling escrow activities including paying off mortgages and clearing title and other debts.

Exclusive Agency Listing: A contract giving one broker the sole right to sell a property for a specified time, while allowing the owner to sell the property without payment of a commission.

Exclusive Right to Sell Listing: A contract giving a broker the exclusive right to sell a property and collect a commission if the property is sold by anyone, including the owner, within the terms of the agreement.

Fair Market Value (UK Open Market Value): A figure that is the highest amount a purchaser would agree to pay for a property and the lowest amount the vendor would be prepared to sell at.

Fee Simple or Fee Absolute: A freehold title or absolute ownership of real property.

FHA Financing / Loan: A loan which is insured against loss by the Federal Housing Administration (FHA), part of the US Dept. of Housing and Urban Development (HUD). Such financing requires only a 3 to 5 per cent down payment.

Fixed Rate Mortgage: A mortgage with a fixed interest rate, usually over a period of 15 to 30 years.

Flood Certificate: A certificate that identifies those properties situated in “special flood hazard areas” and may require flood insurance to be arranged.

Flood Insurance: A form of insurance designed to protect property owners from loss due to the defined peril of flood. It is required for properties located in federally designated areas.

Foreclosure (UK Repossession): Legal proceedings instigated by a lender to deprive a person of ownership rights when mortgage payments haven’t been maintained (called repossession in some countries).

FSBO: An abbreviation for ‘For Sale By Owner’, when a home is sold without the assistance of a real estate agent. Good Faith Estimate: A disclosure that must be given to all mortgage loan applicants within three business days of an application. It is an accurate estimate of all likely costs to be incurred.

Graduated-Payment Mortgage (GPM): A loan requiring lower payments in the early years, with payments increasing in steps until they are sufficient to amortize the loan. Also called a ‘flexible payment mortgage (FPM)’.

Growing Equity Mortgage (GEM): A loan which the payment is increased by a specific amount each year, with the additional payment amount applied to principal retirement. This results in the maturity of the loan significantly shorter than a comparable level-payment mortgage.

Hazard Insurance (Building Insurance): Homeowner’s insurance that covers a property against certain risks (hazards) such as fires and storms. See Flood Insurance.

Home Inspection: A home inspection is a thorough examination of the condition of a home before purchase, also called a survey and carried out by a surveyor in other countries. It should be completed by a professional home inspection company which provides a detailed report. You can make a purchase contingent on a satisfactory home inspection.

Homeowners Association (HOA): An organization of owners in a community property such as a condominium or co-operative development, usually for the purpose of managing the common elements of the development and enforcing deed restrictions.

Homeowners Insurance (UK Insurance Schedule): An insurance policy that protects a homeowner from ‘casualty’ (losses or damage to a third party’s property). Required by lenders (premiums are usually included in monthly mortgage payments).

HUD: The US Dept. of Housing and Urban Development (HUD), which sells homes deeded to HUD/FHA by mortgage companies who foreclosed on FHA insured mortgage loans. HUD is also responsible for government housing programs.

Income Property (UK Rental Property): Properties owned with intention of producing an income. Also referred to as ‘non-owner occupied property’ or ‘rental property’.

Impound Account: An account held by a lender for payment of taxes, insurance and other periodic debts against a property. The borrower pays an apportioned amount with each monthly loan payment and the lender pays the bills with the accumulated funds.

Interest Rate: A percentage that when multiplied by the principal determines the amount of money that the principal earns over a period of time (usually one year).

Joint Tenancy: Property ownership by two (e.g. a married couple) or more persons with an undivided interest and the right of survivorship, where if one owner dies the property automatically passes to the joint owner(s).

Jumbo Mortgage: A high value mortgage, usually in excess of $250,000, with a lower than average interest rate.

Lien: A charge against property making it security for a debt such as a mortgage or community fees.

Listing: A property listed for sale, a record of property for sale by a broker, or a written contract between a property owner and an agent authorizing the agent to perform certain services for the owner.

Loan Origination: A fee charged by the lender for evaluating, preparing and submitting a proposed mortgage loan.

Loan Processing (Underwriting): Steps taken by lender from the time of the loan application is received to the time the application is approved or declined. The process includes receiving the application, credit searches (investigation) and the overall underwriting assessment of the application.

Loan Terms (UK Mortgage Conditions): Necessary conditions for a loan which specify the amount borrowed, interest rate, maturity, method of repayment, etc.

Lock in Period (LIP): The period of a mortgage during which the interest rate is fixed.

Lot: The plot or parcel of land on which a home is built or the land on which a mobile home is located.

Low-Documentation (UK Self Declaration): Below stated LTV, potential lender will require the applicant to state the source and the affordability of the mortgage applied for, without providing supporting documentation such as payslips or trading accounts.

Market Value (UK Open Market Value): The current value of a property compared with similar properties, generally accepted to be the highest price a buyer will pay and the lowest price a vendor will accept.

Mortgage: A written instrument that creates a lien against real property as security for the payment of a loan.

Mortgage Insurance Premium (MIP): A charge paid by the borrower (usually as part of the closing costs) to obtain financing particularly when making a down payment of less than 20% of the purchase price.

Mortgageee: One who holds a lien on property or title to property as security for a debt, i.e. the lender.

Mortgagor: One who pledges property as security for a loan, i.e. the borrower.

Multiple Listing Service (MLS): A broker information network whereby an association of real estate brokers agrees to share listings publicizing homes for sale, where the selling agent splits the commission with agent who finds a buyer. Note for builders inventories and off plan homes see your buyers agent.

National Association of Real Estate Brokers (NAREB): An organization of minority real estate salespersons and brokers who are called ‘realtists’.

Offer: A bid to buy a property at a specified price.

Origination Fee (UK Application Fee): A fee charged by the lender to cover the costs of setting up a mortgage. This will include preparation of documents and certain processing expenses in connection with completing a mortgage account.

Open Listing: A listing of properties for sale given to any number of brokers without liability to compensate any except the broker who first secures a buyer.

Payoff (UK Redemption): Complete repayments/settlement of the principal balance along with interest and any other amounts due. The payoff of an account occurs either over the full term of the mortgage, through monthly repayments, or through early redemption.

Planned Unit Development (PUD): A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels.

Plat: A plan or map of a specific land area.

Point: An amount equal to 1 per cent of the principal amount being borrowed. A lender may charge a borrower several points as a fee for providing a loan. See also Discount Points.

Preliminary Title Report: A report made by a title company stating whether there are any other claims to ownership of a property. A necessary step before mortgage loan can be approved.

Pre-Paids (UK Prepayments): Those expenses of a property which are paid in advance of their due date and will usually be pro-rated upon closing, such as taxes, insurance, etc.

Prepayment Penalty: A penalty sometimes imposed on a borrower when a loan is paid off before the end of the mortgage term (maturity).

Principal: The amount of money borrowed to buy a property and the amount still owed. Also one who owns or will use a property.

Principal & Interest Payment (P&I): A periodic (usually monthly) mortgage payment that includes interest charges plus an amount applied to the amortization of the principal balance.

Principal, Interest, Taxes & Insurance (PITI): Monthly mortgage payment (P&I) plus an amount deposited in escrow against future property tax and insurance payments.

Private Mortgage Insurance (PMI): See Mortgage Insurance Premium (MIP) above.

Property Taxes: Taxes based on assessed value of a home paid by the homeowner for community services such as schools, public works and other costs of local government.

Purchase-Money Mortgage: A mortgage given by a buyer to a seller in part payment of the purchase price of a property.

Real Estate: In law, real estate is land and everything built on or attached to it.

Real Estate Broker: A person who has passed a state broker’s examination and is licensed by the state to represent buyers and sellers in real estate transactions. A brokerage is the business of being a broker.

Real Estate Salesperson: A person who has passed a state examination and who works under the supervision of a broker.

Real Estate Taxes: Property taxes levied on land and buildings charged to owners by local government (e.g. county) agencies.

Realtist: A member of the National Association of Real Estate Brokers (NAREB).

Realtor: A member of the National Association of Realtors (NAR), a professional association. Not all brokers are realtors.

Refinance (UK Equity Release): To replace and old loan with a new loan, either to reduce the interest rate, secure better terms or increase the amount borrowed.

Seller’s Agent / Broker: A real estate agent employed solely by the seller and under obligation to obtain the best price and terms for the seller.

Remodeling / Home Improvement: To modernize, renovate or restore former condition of a property. Also called rehabilitation.

Settlement: See Closing.

Single Family Home: A detached property built on its own lot (plot or parcel).

Subdivision: A tract of land divided into lots for homebuilding purposes.

Survey: A process under which a parcel of land is measured and a blueprint produced showing its measurements, boundaries and area. Note to be confused with a British home survey, which is called a home inspection in America.

Tenancy in Common: A form of ownership in which two or more persons buy property jointly, but with no right of ownership. Owners are free to will their share to anyone they choose, which is the main difference between this and joint tenancy. Often used by friends or relatives buying together.

Term (UK Loan Term): The life-span of a mortgage, e.g. 15 or 30 years.

Title (Title Deeds): The right of possession and evidence of ownership.

Title Company: A company that issues title insurance and which may also perform escrow functions.

Title Insurance: Protects lenders and homeowners against loss of their interest in property due to legal defects in the title (e.g. liens or encumbrances) discovered after the change of the ownership.

Title Search: A professional investigation of public records to establish the chain of ownership of a property and note any outstanding liens, mortgage, encumberances or other factors that may affect clear title.

Truth-in-Lending: Federal law requiring the exact disclosure of credit terms using a recognized format. This is intended to help borrowers compare lending costs, terms and conditions of different lenders. Also known as ‘Regulation Z’.

Variable Rate Mortgage (VRM): See Adjustable Rate Mortgage (ARM).

Zoning: The procedure that classifies land and property for a number of different uses such as residential, commercial or industrial, in accordance with a land-use plan. In some countries, an area must be specifically zoned for short term rentals.

Thanks to the Buyers Association, UK, and Survivor Books UK for their help with UK terms.