Real estate terms, explained
Plain-language definitions of terms you'll see when buying, selling or financing a home in Florida. Have a question about something not listed? Just ask.
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1031 Exchange
Named after Section 1031 of the Internal Revenue Code, a strategy that allows real estate investors to defer capital gains, depreciation recapture and related taxes when selling an investment or business property, provided they reinvest the proceeds in a similar ("like-kind") property. Strict deadlines apply: replacement property must be identified within 45 days of the sale and purchased within 180 days, and the proceeds must be held by a qualified intermediary rather than the seller. A primary residence does not qualify. Investors should involve a tax professional and intermediary before listing the property.
A
Annual Percentage Rate (APR)
The yearly cost of a loan expressed as a percentage, including the interest rate plus certain lender fees and charges. Because it includes those costs, the APR is usually higher than the interest rate and is useful for comparing loan offers.
Appraisal
An independent professional's opinion of a property's market value, based on its features, condition and recent comparable sales. Lenders require an appraisal to confirm the home supports the loan amount. An appraisal is different from a Broker Price Opinion (BPO) or CMA (Comparative Market Analysis).
B
Buyer Protection Plan (Home Warranty)
A service contract that covers repair or replacement of major home systems and appliances for a set period, typically one year. If one is included in the contract, the invoice is provided to the closing agent so it can be paid at closing.
C
Close of Escrow (Closing)
The point when the transaction is completed: documents are signed, funds are transferred from the buyer to the seller, and the buyer becomes the legal owner. Title insurance coverage begins at this time.
Closing Disclosure (CD)
A federal form that lists the final terms and costs of a mortgage loan. The borrower must receive an initial version of it at least three business days before consummation; for this purpose, business days include every day except Sundays and federal holidays. Compare it to your Loan Estimate. The settlement statement shows the final amount needed to close.
Comparable Sales (Comps)
Recently sold properties similar to the subject property in location, size, age and features. Appraisers and agents use them to estimate market value.
Condominium Association Approval
Many Florida condominium (and some homeowners) associations must approve a buyer or tenant before closing, sometimes including an application, background check or interview. Because approval can take several weeks, apply as early as possible.
Consummation
The moment the borrower becomes contractually obligated to the lender on the loan, usually at the signing of the loan documents. It is not the same as becoming obligated to the seller under the purchase contract, and it may differ from the closing or disbursement date.
D
Deed
The written document that transfers ownership of real property. The person transferring ownership is the grantor and the person receiving it is the grantee. It includes the names of both parties and the property's legal description, and the seller signs it at closing.
Deed Restrictions
Limitations recorded with a property's deed that control how it may be used, such as rules on building size, fences, parking or rentals. They often stay with the property through future sales.
Disbursement Date
The date funds are paid out: to the seller and others in a purchase, or to the borrower or third parties in a refinance or other loan transaction. Disbursement typically occurs at Closing.
E
Earnest Money Deposit
A good-faith deposit the buyer makes after the contract is signed, held in escrow by a title company, attorney or broker. It is credited toward the buyer's costs at closing. Whether it is refunded if the sale falls through depends on the contract terms.
Easement
A legal right for someone to use part of another person's property for a specific purpose, such as utility lines, drainage or access. Easements usually stay with the property when it is sold.
Endorsement
An addition to a title insurance policy that expands or limits its coverage for specific situations, such as survey matters or condominium issues.
F
FIRPTA
The Foreign Investment in Real Property Tax Act, a federal law enacted in 1980 that requires income tax to be withheld when a foreign person sells or disposes of a U.S. real property interest. The buyer is responsible for the withholding, generally 15% of the sale price, which the closing agent collects at closing and sends to the IRS. Reduced rates or exemptions may apply when the buyer will use the home as a residence and the price is $1 million or less, and the seller may apply to the IRS for a lower amount. Foreign sellers should consult a tax professional early in the process.
Foreclosure
The legal process by which a mortgage lender takes and sells a property because the borrower has stopped making mortgage payments. Florida is a judicial foreclosure state, meaning the lender must file a lawsuit in circuit court (in Pinellas County, the Sixth Judicial Circuit) rather than using a non-judicial power of sale. If the court enters a final judgment, the property is sold at a public sale conducted by the Clerk of Court. The owner can generally stop the process by paying the full amount owed before the clerk files the certificate of sale. Homeowners facing foreclosure should speak with an attorney about their options, which may include a loan modification or short sale.
H
Hazard and Homeowner's Insurance
Insurance that protects the home against losses such as fire, windstorm and certain other perils, and usually includes liability coverage. Flood insurance is a separate policy; it is required in designated flood zones when the loan is federally backed or regulated. Lenders require proof of coverage, naming them on the policy, before closing.
I
Impounds (Escrow Account)
An account set up by the lender to collect a portion of the property taxes and insurance premiums with each monthly payment, then pay those bills when due.
L
Legal Description
The official description of a property's exact location and boundaries, based on lot and block, survey or government records. It identifies the parcel so precisely that it cannot be confused with any other. A street address is not a legal description.
Lien
A legal claim against a property as security for a debt, such as a mortgage, unpaid property taxes, a contractor's lien or a court judgment. Liens are typically paid off at closing so the buyer receives clear title.
Loan Estimate (LE)
A three-page federal form showing a loan's estimated terms, monthly payment and closing costs. The lender must provide it within three business days of receiving a loan application, making it easy to compare offers.
M
Marital Status (Spouse Signatures)
A spouse may need to sign certain closing documents even if their name will not be on the deed or loan. Under Florida law, a spouse must generally sign the deed or mortgage on homestead property. Check with your closing agent and lender early.
Mortgage
The legal document that pledges the property as security for a loan. It gives the lender a claim against the property if the borrower does not meet the terms of the promissory note, and it sets out the borrower's duties to pay, insure and maintain the property.
O
Owner's Title Policy
Title insurance that protects the owner against covered losses from defects in title, undisclosed liens or other ownership problems. It is a one-time premium paid at closing and lasts as long as you own the property. In Pinellas, Pasco and Hillsborough counties, the seller customarily pays for it, though this is negotiable.
P
PITI
Principal, Interest, Taxes and Insurance: the four parts of a typical monthly mortgage payment. HOA or condominium dues are usually paid separately.
Power of Attorney
A written document that gives another person (the attorney-in-fact) authority to act on your behalf. If a power of attorney will be used to sign closing documents, the lender and title company usually need to review and approve it in advance.
Promissory Note
The borrower's written promise to repay the loan under specific terms, including the amount, interest rate and payment schedule. It is secured by the mortgage.
R
Recording
Filing documents such as deeds and mortgages with the county's official records (in Florida, the Clerk of the Circuit Court) so they become public record.
S
Settlement Statement
A document prepared by the closing agent that itemizes every cost, credit and payment for both buyer and seller. It shows the exact amount the buyer must bring to closing and the seller's net proceeds.
Short Sale
A sale in which a financially distressed homeowner sells the property for less than the remaining mortgage balance. Because the proceeds do not cover the full debt, the mortgage lender (and any other lienholders) must approve the sale, which often adds weeks or months to the timeline. A short sale is an alternative to foreclosure and is generally less damaging to the owner's credit. Whether the lender forgives the remaining balance depends on the approval terms, so sellers should consult an attorney and tax professional.
Survey
A drawing by a licensed surveyor showing the property's boundaries, improvements, easements and any encroachments. Lenders or title insurers often require one; a seller's prior survey may be accepted if nothing on the property has changed.
T
TRID
TILA-RESPA Integrated Disclosure: the federal rules that created the Loan Estimate and Closing Disclosure forms used on most mortgage loans.