Real Estate Jargon, Decoded: A Plain-Language Glossary

Escrow

A neutral third-party account that holds funds or documents during a real estate transaction until all conditions of the sale are met. Neither the buyer nor seller can access escrow funds until closing is complete.

Earnest Money

A deposit made by the buyer shortly after an offer is accepted, demonstrating serious intent to purchase. It is typically applied toward the down payment or closing costs at settlement, but may be forfeited if the buyer backs out without a valid contingency.

Contingency

A condition written into a purchase contract that must be satisfied before the sale can proceed. Common examples include financing contingencies, inspection contingencies, and appraisal contingencies.

Appraisal

An independent professional assessment of a property's market value, typically required by a lender before approving a mortgage. If the appraised value comes in below the purchase price, the lender may not fund the full loan amount.

Title

The legal record of who owns a property and what claims or liens exist against it. A clear title — free of disputes or encumbrances — is required to complete most real estate sales.

Easement

A legal right for someone other than the property owner to use a portion of the land for a specific purpose. A utility easement, for example, allows a utility company to access lines that run through the property.

Amortization

The process of paying off a loan through regular scheduled payments that cover both principal and interest. Early payments in an amortized loan go mostly toward interest; later payments shift more toward reducing the principal balance.

Closing Costs

Fees and expenses paid at the final stage of a real estate transaction, separate from the down payment. These typically include lender fees, title insurance, attorney fees, and prepaid taxes or insurance, and often total 2–5% of the loan amount.

Lien

A legal claim against a property, usually as security for a debt. Common liens include mortgages, unpaid taxes, and contractor judgments. Liens must generally be resolved before a property can be sold.

Pre-Approval

A lender's conditional commitment to extend a mortgage up to a specified amount, based on a review of the borrower's credit, income, and assets. Pre-approval is stronger than pre-qualification and signals to sellers that the buyer is a serious, vetted candidate.

Disclosure

A legally required statement from the seller about known material defects or conditions affecting the property. Disclosure requirements vary by state, but sellers are generally obligated to reveal issues that could affect value or safety.

Counter Offer

A response to an initial offer that changes one or more terms — such as price, closing date, or included items. A counter offer legally rejects the original offer and replaces it with new terms for the other party to accept, reject, or counter again.