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Buying or selling a home in Kentucky means coming across terms like escrow, appraisal, and earnest money deposit. Our glossary is designed to give buyers, sellers, and investors across London, Corbin, Laurel County, Knox County, and all of Kentucky quick, clear definitions in plain English—so you can move forward with confidence. |
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Master Real Estate Glossary
Abstract of Title – A summary of all the legal transactions and claims affecting a property's ownership.
Helps verify clear ownership before closing.
Addendum – A separate document that modifies or adds to the original purchase agreement.
Used to change dates, terms, or include repair requests.
Agreement of Sale – The contract between buyer and seller outlining purchase terms.
Also called a purchase agreement.
Appraisal – A licensed appraiser’s opinion of value, often required by a lender.
Compares the home to recent comparable sales.
Assessment – The value a local government places on a property for tax purposes.
Used to calculate annual property taxes.
As Is – A sale without warranties or repairs—the buyer accepts current condition.
Sometimes worded “As Is, Where Is.”
Binder – Preliminary, non-binding document outlining terms of an offer.
Guides drafting of the formal contract.
Buyer Agent – A licensed professional who represents the buyer’s interests.
Owes fiduciary duties to the buyer.
Caveat Emptor – “Let the buyer beware”; buyers must do due diligence.
Disclosure rules vary by state.
Cash to Close – Total funds a buyer must bring to closing.
Down payment + closing costs − credits.
Chain of Title – Chronological history of ownership transfers and claims.
Reviewed during title search.
Closing – Final step when ownership transfers.
Also called settlement.
Closing Costs – Fees paid at closing beyond purchase price.
Lender, title, attorney, taxes/insurance, etc.
Cloud on Title – A claim/defect that could impair ownership.
Must be cleared before transfer.
Commission – Compensation paid to brokers/agents for services.
Typically split between listing and buyer sides.
Contingency – Condition that must be met for contract to proceed.
Inspection, appraisal, financing, etc.
Contingent (Under Contract) – Sale with conditions to satisfy before closing.
Common contingencies noted in MLS.
Counteroffer – Response that changes terms of the original offer.
Restarts negotiations.
Credit Score – Numeric measure of creditworthiness.
Affects loan approval and rate.
Debt-to-Income Ratio (DTI) – Share of income going to debt payments.
Key underwriting metric.
Deed – Legal instrument that transfers ownership.
Warranty, special warranty, quitclaim, etc.
Deposit (Earnest Money) – Good-faith funds showing buyer’s intent.
Applied to closing if the deal closes.
Down Payment – Portion of price paid upfront.
Varies by loan program.
Due Diligence Period – Window for buyer investigations.
Often overlaps inspections.
Dual Agent – One agent represents buyer and seller.
Requires written consent; not allowed in all states.
Easement – Legal right for others to use part of a property.
Utilities, access, shared drives.
Effective Age – How old a building appears based on condition.
May differ from actual age.
Equity – Market value minus loan balance.
Builds as you pay down and values rise.
FHA Loan – Government-backed loan with low down payment.
MIP applies; flexible guidelines.
Fixed-Rate Mortgage – Interest rate stays the same for the term.
Predictable principal/interest payment.
Fixtures – Items permanently attached to the property.
Included unless excluded in writing.
Gazumping – Seller accepts a verbal offer then a higher one before contract.
Risk before signatures.
HOA (Homeowners Association) – Governing body for shared communities.
Maintains common areas; enforces rules/fees.
HOA Documents – Rules, budgets, reserves, minutes, disclosures.
Review before buying.
Home Inspection – Professional evaluation of condition.
Structure, systems, safety.
Homeowners Insurance – Policy covering damage/liability.
Usually required by lenders.
Inspection Period – Timeframe to complete inspections.
Often equals due diligence.
Interest Rate – Cost of borrowing expressed as a percentage.
Impacts monthly payment.
Legal Description – Precise parcel description used in deeds/surveys.
Identifies exact boundaries.
Lien – Legal claim on property to secure a debt.
E.g., taxes, mechanics, HOA.
Loan-to-Value (LTV) – Loan amount ÷ appraised value.
Lower LTV can mean better terms.
MLS – Database where agents list/search properties.
Backbone for syndication.
Mortgage – Loan to purchase real property.
Paid back monthly (PITI).
Mortgage Assumption – Buyer takes over seller’s loan and terms.
If allowed by lender/investor.
Mortgage Insurance (PMI/MIP) – Protects lender if borrower defaults.
PMI: conventional <20% down; MIP: FHA.
Offer – Formal proposal to purchase with price and terms.
Seller may accept, reject, or counter.
Option Fee – Payment for the right to terminate within a set period.
Common in “option period” states.
Origination Fee – Lender’s fee to process a loan.
Often 0.5–1% of loan amount.
PITI – Principal, Interest, Taxes, Insurance.
Core components of the monthly payment.
Pre-Approval – Lender’s conditional commitment stating how much you can borrow.
Stronger than pre-qualification.
Pre-Qualified – Estimate of affordability based on self-reported info.
No doc verification.
Principal – Original loan balance outstanding.
Reduces with each payment.
Property Taxes – Local taxes based on assessed value.
Often escrowed by lender.
Rate Lock – Agreement that guarantees an interest rate for a set time.
Typically 30–60 days.
REALTOR® – Real estate licensee who is a NAR member.
Not all agents are REALTORS®.
Real Property – Land and anything permanently attached.
Re-trade – Attempt to renegotiate price downward during diligence.
Sellers may resist without cause.
Settlement Statement (Closing Disclosure) – Final, itemized closing costs.
Provided to buyer before closing.
Survey – Map of boundaries and improvements.
Checks encroachments/easements.
Title – Legal ownership rights to real property.
Conveyed by deed at closing.
Title Insurance – Policy protecting against title defects/claims.
Lender’s policy required; owner’s optional but recommended.
Underwriting – Lender’s risk review of borrower and property.
Leads to clear-to-close or conditions.
USDA Loan – Government-backed loan for eligible rural areas.
Often 0% down if qualified.
VA Loan – Loan for eligible veterans/service members.
0% down; no PMI.
Walkthrough (Final) – Last visit before closing to confirm condition.
Verifies agreed repairs and no damage.
CMA (Comparative Market Analysis) – Agent’s pricing analysis using comparable sales.
Guides list price and strategy.
Listing Agreement – Contract between seller and brokerage to market the property.
Defines term, price, compensation, and duties.
Exclusive Right to Sell – Listing where the broker is due compensation regardless of who procures the buyer.
Most common listing type.
Exclusive Agency – Seller can find their own buyer and avoid paying the listing broker.
Less common variant.
Open Listing – Non-exclusive; commission only to the procuring broker.
Minimal representation.
DOM (Days on Market) – Number of days a listing has been active.
Signal of demand and pricing.
Coming Soon – MLS status allowing pre-marketing before showings.
Rules vary by MLS.
Pocket Listing – Property marketed off-MLS to select buyers.
Subject to MLS policies/clear cooperation rules.
Price Improvement – A reduction in list price to stimulate activity.
Often after limited showings/offers.
Seller’s Disclosure – Document where the seller discloses known material facts/defects.
Requirements vary by state.
Seller Concession – Seller-paid credit toward buyer’s costs.
May be capped by loan program.
Post-Occupancy (Rent-Back) – Seller remains in the home after closing per agreement.
Defines rent, term, and liability.
Kick-Out Clause – Lets a seller accept another offer if a buyer with a home-sale contingency can’t remove it within a set time.
Notices and timelines are key.
Backup Offer – Accepted offer in secondary position if the first terminates.
Activates on primary fallout.
Highest and Best – Seller requests buyers’ best final terms by a deadline.
Used in multiple-offer situations.
Escalation Clause – Raises buyer’s offer above competing offers up to a cap.
Typically requires proof of the competing offer.
Appraisal Gap Coverage – Buyer pledges extra cash if appraisal comes in low.
Bridges appraised value vs. price.
Staging – Preparing a home with furnishings/repairs for best presentation.
Aims to maximize perceived value.
Home Warranty – Service contract covering certain systems/appliances.
Often offered as a buyer incentive.
ARM (Adjustable-Rate Mortgage) – Interest rate can change after an initial fixed period.
Common formats: 5/6, 7/6, 10/6.
Amortization – Schedule showing how payments reduce principal and interest over time.
Balloon Mortgage – Smaller payments with a large lump-sum due at term end.
Bridge Loan – Short-term financing that “bridges” the gap between transactions.
Buydown (2-1, 3-2-1) – Up-front fee to temporarily reduce the interest rate.
Often funded by seller/lender credits.
Conventional Loan – Non-government loan (may be conforming or jumbo).
PMI applies if <20% down.
Conforming Loan – Meets GSE limits and guidelines.
Limits set annually.
Jumbo Loan – Exceeds conforming loan limits.
Discount Points – Up-front fees to reduce the interest rate.
Each point = 1% of loan amount.
HELOC – Home-equity line of credit with revolving access to funds.
Home Equity Loan – Lump-sum loan secured by home equity.
Prepayment Penalty – Fee for paying off a loan early (if applicable).
Seasoning – Required time a loan/asset/accounts must be held before certain actions.
e.g., using gifted funds, refinances.
Clear to Close (CTC) – Final lender approval indicating all conditions are met.
Loan Estimate (LE) – Early disclosure of loan terms and estimated costs.
Escrow Account – Account used by the lender to collect/hold taxes and insurance.
Amendment – Document that changes an executed contract.
All parties sign to be effective.
As-Is Clause – Contract language stating seller will make no repairs/warranties.
Encroachment – Physical intrusion onto another’s property (e.g., fence, shed).
Encumbrance – Claim or liability attached to property affecting use/transfer.
Lis Pendens – Notice of pending legal action affecting title.
Mechanic’s Lien – Claim by contractors/suppliers for unpaid work/materials.
Option to Purchase – Buyer pays for a right (not obligation) to buy within a period.
Quiet Title Action – Lawsuit to resolve competing claims to title.
Right of First Refusal (ROFR) – Right to match an offer before the seller accepts another.
Specific Performance – Court order requiring a party to perform under the contract.
Liquidated Damages – Pre-agreed remedy (often earnest money) if a party breaches.
Mediation/Arbitration – Alternative dispute-resolution methods outlined in many contracts.
Time Is of the Essence – Clause making deadlines material terms of the contract.
Force Majeure – Clause addressing unforeseen events that prevent performance.
Possession – Date/time buyer is entitled to occupy the property.
Title Commitment – Title company’s promise to insure with listed requirements/exceptions.
Title Search – Examination of public records to verify ownership and claims.
1031 Exchange – Tax-deferred swap of like-kind investment properties.
Strict timelines/identification rules.
ARV (After Repair Value) – Estimated value after renovations.
BRRRR – Buy, Rehab, Rent, Refinance, Repeat investment strategy.
Cap Rate – NOI ÷ purchase price (or value).
Snapshot yield metric for income property.
Cash-on-Cash Return – Annual pre-tax cash flow ÷ cash invested.
DSCR – Net operating income ÷ annual debt service.
Lenders use to size loans.
GRM (Gross Rent Multiplier) – Price ÷ gross annual rent.
NOI (Net Operating Income) – Income minus operating expenses (before debt/capex).
Vacancy Rate – Percentage of units or time not rented.
Rent Roll – Schedule of tenants, rents, terms, and deposits.
Pro Forma – Forward-looking income/expense projection.
NNN (Triple Net) – Tenant pays taxes, insurance, and maintenance in addition to rent.
Gross Lease – Landlord pays most operating expenses; tenant pays base rent.
Net Lease – Tenant pays some/most operating expenses in addition to base rent.
CAM (Common Area Maintenance) – Tenant’s share of common area costs.
Assignment of Contract – Transfer of a buyer’s contractual rights to another party.
Double Closing – Back-to-back closings where a middle party buys then sells same day.
Hard Money Loan – Asset-based, short-term financing at higher rates/fees.
Building Code – Standards governing construction and safety.
Certificate of Occupancy (CO) – Local approval that a building is safe to occupy.
Permit – Authorization to perform construction/renovation work.
Punch List – Items the builder/seller must complete or fix before final acceptance.
Variance – Allowance to deviate from zoning requirements.
Setback – Minimum distance a structure must be from lot lines/streets.
CC&Rs – Covenants, Conditions, and Restrictions governing a subdivision/hoa.
Lead-Based Paint Disclosure – Required for most pre-1978 homes regarding lead hazards.
WDI/Termite Report – Inspection for wood-destroying insects.
Radon – Naturally occurring gas; high levels require mitigation.
Flood Zone – FEMA-mapped area with specified flood risk.
Insurance and lender rules may apply.
FHA 203(k) – Rehab mortgage that finances purchase plus renovations.
BPO (Broker Price Opinion) – Broker’s opinion of value; not an appraisal.
Fiduciary Duty – Duties of loyalty, confidentiality, disclosure, obedience, care, and accounting owed to a client.
Designated Agency – Broker designates separate agents to represent each side in one brokerage.
Transaction Broker – Facilitates a transaction without fiduciary duties to either party (where permitted).
Procuring Cause – The actions that start an uninterrupted chain of events leading to a sale.
Cooperating Broker – The broker who brings the buyer to a listing.
Commission Split – How commission is divided among brokers/agents.
Referral Agreement – Written terms for paying a referral fee between licensees.
IDX – Internet Data Exchange rules/feeds that display MLS listings on websites.
Lockbox – Secured device that stores property keys for showings.
Fair Housing – Laws prohibiting discrimination in housing.
Follow federal, state, and local rules.
Ad Valorem Tax – Tax based on assessed value.
Assessed Value – Value set by the assessor for taxation.
Homestead Exemption – Tax reduction/benefit for a primary residence (where available).
Millage Rate – Property tax rate expressed in mills (1 mill = $1 per $1,000 of assessed value).
Special Assessment – Extra charge for specific public improvements.
Transfer Tax – Tax/fee charged when property changes hands (varies by jurisdiction).
Documentary Stamp/Recording Tax – Fee on recorded documents like deeds and mortgages.
Capital Gains – Profit on the sale of an asset; exclusions may apply to a primary residence.
Consult a tax professional.
Depreciation – Tax deduction for wear/tear on investment property.
Cost Basis – Original purchase price plus certain costs/improvements used to calculate gain.
1099-S – IRS form used to report real estate sale proceeds.
FIRPTA – Federal law requiring tax withholding on certain sales by foreign persons.
Consult a qualified tax professional.
Escrow – Neutral third party holding funds/documents until conditions are met.
Settlement Agent – Title company or attorney coordinating closing, funds, and recording.
Funding – Lender wires loan proceeds for disbursement at closing.
Recording – Filing the deed and/or mortgage in public records to give notice of ownership/liens.
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