Residential Leasing Terminology

Real estate is a complex legal market.

The benefit of understanding the vocabulary used during a transaction is critical. The law binds two agreements together with unique terms and legal definitions.

It’s important to include a comprehensive glossary because understanding the terminology is the first step to being successful in a real estate transaction. Certain terms are commonly used by real estate brokers and will inevitably be used when you try to sell a home.

This glossary has terms and definitions in plain English. There are many abbreviations used in real estate listings as well as specific terminology that are used in different markets.

Absorption Rate: The rate at which homes sell in a localized market during a given time period is called the Absorption Rate. The absorption rate is a calculation based on dividing the number of homes sales in a month by the number of available homes for sale.

Active Listing: When a property is listed for sale in the MLS, it is given a status of “Active” to indicate that the seller is currently marketing the home and soliciting applications from Tenants.

Appraisal: A report highlighting the estimated value of the property completed by a qualified third party. This is typically done for the benefit of the buyer to ensure the property is worth what they are paying.

Appreciation: The increased value of an asset.

Application to Rent: A formal document that states the general details of the applicant such as current address, rental history, employment history, references and other important questions.

As-Is Condition: The acceptance by the Tenant to lease the property in the existing condition of the premises at the time the lease agreement is executed.

Association Fee/HOA Fee: In addition to a mortgage, certain housing communities such as town homes have a monthly fee associated with maintaining the common areas and amenities.

Building Code: The various laws set forth by the ruling municipality as to the end use of a certain piece of property and guidelines for design, materials and type of improvements allowed.

Certificate of Occupancy: A document presented by a local government agency or building department certifying that the property is in a condition suitable for use.

Closing: This is the final meeting, where the Tenant and Landlord sign the necessary paperwork; complete the transaction and release/take possession of the property. Usually the representing agents attend.

Closing Disclosure: A form that provides the final details about the mortgage loan. It includes loan terms, projected monthly payments and how much the extra fees will be.

Collateral: Something of value (in this case your home) that is held to ensure repayment of a mortgage or loan.

Commission: A percent of the sale price of the home that is paid to agents. The seller usually pays commission to both the buyer and listing agent.

Comparable Properties: Homes in the area of interest that have recently sold and have similar features.

Contingencies: Conditions that must be met in order to close the transactions. Contingencies are typically tied to a date, referred to as a deadline. If the contingency is not satisfied, the contract may be canceled.

Debt-to-Income Ratio: A lender will look at a borrowers debt versus income to determine the amount of loan they are eligible for and if they can repay their debt plus the home loan.

Default: A failure to perform a legal or contractual duty.

Depreciation: An accounting practice that subtracts the cost of a capital asset over its estimated useful life expectancy or the value of the real property caused by deterioration or obsolescence.

Dual Agency: Two licensed real estate brokers co-operate to represent the property owner in marketing and selling a real estate asset.

Earnest Money: The deposit made from the buyer to the seller when submitting an offer. This deposit is typically held in trust by a third party. Upon closing, the money will generally be applied to the down payment or closing cost.

Economic Rent: The market rental value of a property at a given point in time, even though the actual rent may be different.

Exclusive Agency Listing: A written agreement between a real estate broker and a property owner in which the owner promises to pay a fee or commission to the broker if specified real property is sold during the listing period.

Fair Market Value: The sales price at which a buyer is willing to pay a seller with both having a reasonable knowledge of the relevant property facts.

Force Majeure: A force that cannot be controlled by parties to a contract and presents parties from executing the provisions of the contract. This includes acts of God such as a flood, earth quake or hurricane and acts of man such as riots, fire and war.

Guarantor: The entity that guarantees a debt or other agreement.

Guarantee: A formal promise or assurance that certain conditions will be fulfilled.

Highest and Best Use: The use of land or buildings, which will bring the greatest economic return over a given time.

Indirect Costs: Development costs, other than material and labor costs, which are directly related to the construction of improvements, including administrative and office expenses, commissions, architectural, engineering and financing costs.

Lease: A legal agreement in writing , whereby the owner of real property, the lessor or landlord, gives the right of possession to another entity, the lessee or tenant, for a specified period of time and terms.

Legal Description: A geographical description identifying a parcel of land by government survey, metes and bounds or lot numbers of a recorded plat including a description of any portion thereof that is subject to an easement or reservation.

Legal Owner: The legal owner has title to the property recorded in the official records.

Letter of Attornment: A letter from the grantor to a tenant, stating that the property has been sold and directing rent to be paid to the grantee, otherwise known as the buyer.

Lot: A parcel of land, generally referring to a part of a subdivision of a block.

Lot Size: The size in square feet of a parcel of land that is commonly referred to as a lot.

Low Rise: A building with fewer than four stories above ground level.

Market Value: The highest price a buyer would be willing to pay in a competitive and open market with all facts being disclosed.

Multiple Listing Service (MLS): A member only service to list real estate properties that are available for sale. These are the most reliable sources to receive up-to-date listing information.

Occupancy Rate: The ratio of rented real estate units compared to vacant real estate units.

Pay-Per-Click: A measurement of digital advertising that charges for each action taken by a user interacting with your ad.

Pay-Per-View: A measurement of digital advertising that charges for each impression made by the end user in viewing your advertisement on their screen.

Plat Map: A map of a specific area which shows the boundaries of individual parcels of land.

Price Elasticity: Economics dictates that supply and demand are a function of price.

Principal: The underlining amount of the loan that is borrowed.

Property Condition: The overall condition of the property for sale including but not limited to the design, layout, foundation, roof, electrical system and air conditioning systems.

Real Property: Land and anything affixed to the land, including buildings, fences, plumbing and heating fixtures or other items not considered personal property.

Rent: Revenue in the form of a fee paid, generally periodically (i.e. monthly or yearly,) for the use of any real property, land, buildings and equipment.

Residential Lease Listing Agreement: A document negotiated and signed between the property Owner(s) and the representing Real Estate Broker that outlines the terms and conditions of selling the property including price, commission, marketing, disclosures and time frame of listing a property for sale.

Specific Performance: A required action compelling one of the parties to carry out the provisions of the executed contract.

Tax Base: This is specifically for seniors, and it allows them to convert the equity in their home to cash.

Tax Lien: A statutory lien, giving the state or municipality priority in a sale for nonpayment of property taxes.

Tax Roll: A record containing the public details of all parcels of land within a county, the names of the owners, assessed values and yearly tax amount are contained within the information.

Tenant: An entity who retains possession and permission to use real property according to an executed lease agreement.

Time is of the Essence: Means that performance by one party within the period specified in the contract is essential to comply with the agreement.

Title: A legal document proving current and proper ownership of the property. Also referred to as a Title Deed, this document highlights the history of property ownership and transfers.

Vacancy Rate: The percentage of available units for rent in multi-unit property.