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Real Estate Glossary™
Master the terminology of home selling to negotiate confidently and protect your equity.
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A
Appraisal
Definition
An unbiased professional estimation of a home's fair market value, typically required by a lender before approving a mortgage.
Why It Matters
If a home appraises for less than the purchase price, the buyer's lender will not fund the full loan amount, potentially jeopardizing the sale.
Common Mistakes
Overpricing a home based on emotion rather than comparable sales, leading to appraisal gaps.
Appraisal Gap
Definition
The difference between the agreed-upon purchase price of a home and the value determined by the appraiser.
Why It Matters
Buyers must either cover the gap with cash, renegotiate the price with the seller, or walk away from the deal.
Common Mistakes
Failing to establish a clear appraisal gap strategy during negotiations.
B
Buyer Agency
Definition
A legal relationship where a real estate agent represents the buyer's interests in a transaction.
Why It Matters
FSBO sellers often negotiate directly with buyer's agents and must understand who is representing whom.
Common Mistakes
Assuming a buyer's agent represents both parties fairly; they are legally bound to advocate for the buyer.
C
Cash Offer
Definition
An offer to purchase a property without the need for mortgage financing.
Why It Matters
Cash offers typically close faster and carry less risk since there is no financing or appraisal contingency.
Common Mistakes
Accepting a lower cash offer without verifying the buyer's actual proof of funds.
Closing Costs
Definition
Fees and expenses paid at the end of a real estate transaction, separate from the purchase price.
Why It Matters
Sellers and buyers both have closing costs, which directly impact the seller's final net proceeds.
Common Mistakes
Failing to account for seller closing costs (title insurance, transfer taxes, escrow fees) when estimating profit.
Comparative Market Analysis (CMA)
Definition
A report comparing a property to similar recently sold, active, and expired properties in the same area to determine its value.
Why It Matters
A CMA is the most reliable way to establish a competitive and realistic asking price.
Common Mistakes
Relying on automated online estimates (like Zestimates) instead of a localized CMA.
Contingency
Definition
A condition in a real estate contract that must be met for the transaction to proceed.
Why It Matters
Common contingencies (inspection, financing, appraisal) give buyers a legal way to back out of the deal and recover their earnest money.
Common Mistakes
Accepting an offer with too many contingencies, increasing the risk of the deal falling through.
Counteroffer
Definition
A response to an initial offer that changes one or more terms, such as price, closing date, or contingencies.
Why It Matters
It legally rejects the original offer and starts a new negotiation phase.
Common Mistakes
Countering too aggressively on minor points and losing a qualified buyer.
D
Disclosure
Definition
A legal document provided by the seller detailing known issues, defects, or history of the property.
Why It Matters
Failing to disclose known material facts can lead to post-sale lawsuits and financial liability.
Common Mistakes
Hiding past water damage or unpermitted work instead of disclosing it upfront.
E
Earnest Money
Definition
A deposit made by the buyer to demonstrate good faith and serious intent to purchase the property.
Why It Matters
It provides security for the seller. If the buyer breaches the contract, the seller may be entitled to keep the deposit.
Common Mistakes
Accepting an offer with an earnest money deposit that is too low to deter the buyer from walking away.
Escrow
Definition
A neutral third party that holds funds and documents until all conditions of the contract are met.
Why It Matters
Escrow ensures that neither the buyer nor the seller is cheated during the transaction process.
Common Mistakes
Misunderstanding the timeline and requirements needed to close escrow smoothly.
F
Fair Market Value
Definition
The price a willing buyer will pay and a willing seller will accept on the open market.
Why It Matters
Pricing a home above fair market value typically results in extended days on market and eventual price reductions.
Common Mistakes
Pricing based on what the seller needs to net, rather than what the market dictates.
Flat Fee MLS
Definition
A service where a FSBO seller pays a flat rate to have their property listed on the local Multiple Listing Service (MLS).
Why It Matters
It provides maximum exposure to buyer's agents without paying a traditional listing commission.
Common Mistakes
Listing on the MLS with poor photos or an inaccurate description, wasting the exposure opportunity.
FSBO (For Sale By Owner)
Definition
The process of selling real estate without the representation of a traditional listing agent.
Why It Matters
Allows homeowners to retain more equity by avoiding listing commissions, but requires them to manage the process.
Common Mistakes
Attempting FSBO without a clear strategy for pricing, marketing, and legal compliance.
H
Home Inspection
Definition
A limited, non-invasive examination of the condition of a home, typically conducted by a licensed professional hired by the buyer.
Why It Matters
Inspection reports often trigger renegotiations for repairs or seller credits.
Common Mistakes
Failing to prepare the home for inspection or hiding known defects.
L
Listing Agreement
Definition
A legally binding contract between a homeowner and a real estate broker granting the broker the right to sell the property.
Why It Matters
It outlines the commission structure, duration, and obligations of both parties.
Common Mistakes
Signing a long-term exclusive right-to-sell agreement without understanding the cancellation terms.
M
MLS (Multiple Listing Service)
Definition
A private database created and maintained by real estate professionals to share information about properties for sale.
Why It Matters
The MLS is the primary source of inventory for buyer's agents and syndicates to major sites like Zillow and Realtor.com.
Common Mistakes
Assuming FSBO sites offer the same exposure as the MLS.
N
Net Proceeds
Definition
The amount of money the seller receives at closing after paying off the mortgage, closing costs, and commissions.
Why It Matters
Net proceeds, not the sale price, represent the actual cash you walk away with.
Common Mistakes
Focusing solely on the highest offer price without calculating the impact of seller concessions and fees.
P
Preapproval
Definition
A written commitment from a lender stating they will provide a buyer with a specific loan amount based on a review of their finances.
Why It Matters
It proves the buyer is financially capable of purchasing the home, reducing the risk of the deal falling through.
Common Mistakes
Accepting an offer from a buyer who only has a 'pre-qualification' rather than a verified preapproval.
S
Seller Concession
Definition
Closing costs or other expenses the seller agrees to pay on behalf of the buyer to facilitate the sale.
Why It Matters
Concessions can make an offer more attractive to cash-strapped buyers but directly reduce the seller's net proceeds.
Common Mistakes
Agreeing to concessions without calculating the final impact on the bottom line.
T
Title Insurance
Definition
Insurance that protects the buyer and lender from financial loss due to defects in a property's title, such as outstanding liens.
Why It Matters
It guarantees the seller has the legal right to transfer ownership of the property.
Common Mistakes
Not understanding local customs regarding whether the buyer or seller pays for the owner's title policy.
Transaction Coordinator
Definition
A professional who assists with the administrative process of a real estate transaction from contract to closing.
Why It Matters
They ensure all paperwork is completed accurately and deadlines are met, reducing legal risk for FSBO sellers.
Common Mistakes
Trying to manage all contract deadlines and escrow communication independently without experience.
Frequently Asked Questions
Common questions about real estate terminology.
Reviewed By
Steve Lockhart
REALTOR® | AI Certified Agent™ | Creator of The Lockhart Method™
Last Updated: June 2026
