The Ultimate Real Estate Glossary: Letter A
The real estate industry has so many terms, it truly is its own language! Most people will tell you to just learn the real estate glossary. as you go along—eventually, you’ll get the hang of it and pick up industry vocabulary.
In reality, that takes a really long time. You don’t want to spend years before becoming familiar with the jargon! You’re only going to get frustrated, and it might lead to costly, misinformed decisions along the way.
This isn’t just about “speaking the lingo”. Knowing the right terms can help you learn faster, engage with your industry peers, and propel your real estate business further.
We’ve created this real estate glossary series to make it easier for you to learn the important real estate terms. You’ll be talking and walking like a real estate professional in no time at all!
For this first installment, we’ll define terms that start with the letter A. In the coming weeks, we’ll cover the next letters in sequence until we reach the letter Z of our real estate glossary series. If there’s a specific word that you’re looking for, check out the rest of our Real Estate Glossary series!
Real estate terms: Numbers & the letter A
1031 Exchange or Starker Exchange: In real estate, this is a swap of one investment property for another, which allows capital gains taxes to be deferred. The name comes from IRS code Section 1031.
1099 Form: 1099s are used to report non-employee income from independent contractors to the IRS. The ones making the payments are responsible for filing this form. For example, property managers will need to send their andlord clients a Form 1099 for all funds collected.. Similarly, a property management company issues 1099s to the contractors they have hired.
Accompanied showings: This refers to showings where the listing agent has to accompany an agent and his or her clients when they view the property.
Addendum: Often used in contracts and other documents, this simply means “an addition to”.
Adjustable-Rate Mortgage (ARM): This is one of the two primary mortgage types where the interest rate is tied to an economic index and fluctuates with the market. That means the rate can change over the course of the loan at five, seven, or ten-year intervals.
Ad valorem tax: This is a tax based on the assessed value of a real estate property. The term is based on a Latin phrase that means “according to value”. Ad valorem taxes may also extend to other tax applications outside of real estate, such as import duty taxes for imported goods, and major personal properties (e.g., boats, sports cars).
Agent: Usually short for “real estate agent”, this is a licensed professional who arranges real estate transactions, connects buyers and sellers, and acts as their representative. Agents are compensated primarily by a commission from the property’s purchase price. In most states, they must work through a real estate broker, firm, or fellow professional with a specialized license.
Amortization: Amortization is the process of paying back a loan with a specific payment amount consisting of both Principle and Interest. Over time, the amount of the payment going to principle increases.
Annual Percentage Rate (APR): This is the total cost of borrowing money, as it reflects the interest rate, closing costs, discount points, mortgage broker fees, and other factors that affect the loan. It’s expressed as a percentage rate of interest. For example, if the APR is 10%, you will pay $1,000 annually per $10,000 borrowed.
Application fees: Application fees are fees that mortgage companies charge buyers during the written application for a loan, usually for running credit reports. This includes lender-specific fees, property appraisal fees, and rental application fees that cover the cost of a tenant background check.
Appraisal: Real estate appraisal is the process of determining the value of a property, based upon comparable sales, cost approach, etc.. The amount is often called the Appraised Value. A professional appraiser is usually chosen by the lender and paid for by the borrower. The end appraised value may or may not correspond to the property’s market value.
“As-is”: You’ll see these in contracts, offer clauses, listings, and marketing materials. It means the seller will not repair or correct any problems with the property—what you see is what they’re selling.
Assessed value: This refers to the dollar value assigned to a property according to a public tax assessor. This determines the applicable property tax. Depending on the state, tax assessors may require on-site evaluations. In general, the value tends to be lower than the appraised fair market value, ranging from 10-100%.
Assumable mortgage: Also known as Mortgage Assumption, this is an arrangement where an outstanding mortgage and its terms can be transferred from the owner to a buyer. The buyer then needs to fulfill the obligations of the existing loan agreement, becoming liable for the payment of principal and interest.
Conclusion
This concludes the first of our series on demystifying real estate jargon.
Our goal is to help you become more real state-savvy, one term at a time. Stay tuned for our next installment!
Any other terms you want to know about? Just comment below and we’ll answer your questions!
Image Courtesy of Andrea Piacquadio