Summary of industry terms and jargon commonly used in the Ann Arbor & Ypsilanti real estate market.
Terminology may vary somewhat between market location and asset type; we may discuss other terminology in the fields of commercial, investment, zoning, construction, or development in separate articles to follow.
**Disclaimer: All of this information is being shared by a real estate broker based on their experience selling real estate in the Ann Arbor & Ypsilanti area. None of this information should be construed as legal advice, tax advice, financial planning advice, nor an agency relationship; be sure to consult licensed experts for advice on these topics.**
For residential real estate in Ann Arbor and Ypsilanti, Washtenaw County, Michigan
A mortgage is a loan product which is used to raise money for buying real estate. Mortgages are typically secured by real estate as collateral which the lender can foreclose on, or repossess, in order to enforce the repayment of the loan or repay the debt borrowed.
2. ARM – Adjustable Rate Mortgage
A mortgage with an interest rate which is adjusted based on an index designed to reflect the lender’s cost to borrow. ARMs are more common in home equity lines of credit and secondary mortgages than primary mortgages, though we do see them as well.
3. Fixed-Rate Mortgage
Amortized mortgages with fixed, stable interest rates throughout the term of the loan. Most mortgages in the US have fixed rates.
4. Mortgage Pre-approval
Loan pre-approvals are preliminary approvals for loans based on a lender’s evaluation of a borrower’s financials including tax returns, bank statements, and credit report.
5. Mortgage Pre-qualification
A preliminary loan qualification is your first step for a loan approval, generally a verbal conversation with a lender where the borrower estimates their credit, income, assets, and liabilities.
6. APR – Annual Percentage Rate
The annual percentage rate a lender charges on a mortgage.
7. Escrow Accounts
These are accounts your lender can require for funds to be set aside for things like property taxes, homeowners insurance, and mortgage insurance for the amortization of a mortgage.
8. Short Sale
A short sale is a real estate transaction where the property sells for less than the amount of debt collateralizing it. A borrower will usually petition their lender, the lienholder, to accept less than what’s owed.
9. Foreclosure, AKA “repo” or “REO”
Foreclosure is the legal procedure where a lender, the lienholder, forces the sale or repossession of a property thru the courts to recover the balance of a loan because the borrower has defaulted (or stopped making payments) on the loan.
10. Conventional Mortgage
Loans which are not guaranteed by the government but conform to Fannie and Freddie protocol for home mortgages and equity lines.
Amortization is the spreading of payments over time; in the context of amortized mortgages these are mortgages whose payments have been spread over time for the sake of giving the borrower a single, simple all-inclusive monthly payment similar to a rental payment.
12. VA Mortgage
VA mortgages are loan products for military veterans, reserves, and retirees for homes, condos, some multi-family properties, manufactured homes, and new construction without a down payment and without requiring mortgage insurance. These loans are guaranteed by the Veterans Administration (VA) which also establishes underwriting lending guidelines for the loans which allows them to offer military borrowers a more flexible debt-to-income ratio or a higher % of mortgage payment in terms of the borrower’s gross monthly income.
13. FHA Mortgage
A mortgage which was guaranteed by Federal Housing Administration (FHA) for residential homebuyers. FHA offers low-down mortgages (typically around 3.5% – 10% down) with mortgage insurance to residential homebuyers. Buyers using FHA loans must remain in their new homes for a minimum of a year. Borrowers are required to have proof of income and employment history, but FHA qualifies buyers with credit scores as low as 500 – 580 depending on the down payment amount and other factors. More on HUD’s website.
14. USDA RD Home Loan Mortgage (US Dept of Agriculture Rural Development Mortgage)
Mortgage product offered by the USDA, an agency of the Federal gov’t. The rural development home loan program helps low-to-mid income families afford homes in rural areas by offering them low-to-now down payment mortgages. The USDA provides an eligibility map, and income limitations and other financial requirements for borrowers. They’re for owner-occupied, non-income properties but can include condos, single family, and homes with some property.
15. Jumbo Mortgage
Non-conforming mortgages in excess of the normal single family / condo conventional mortgage limit of $484,350.
16. Portfolio or Non-Conforming Mortgage
A portfolio mortgage is one which the lending entity keeps in their own investment portfolio as opposed to re-selling to another company. Non-conforming mortgages are loans which do not fit with lending or underwriting guidelines established by FNMA or FHLMC which means the loan will either stay in that lender’s portfolio, or can only be sold to companies who purchase non-conforming loans. Non-conforming mortgages are often confused for subprime mortgages, but in reality the subprime loans are just one type of non-conforming loan since they do not fit within those same guidelines.
17. Subprime Mortgage
A subprime mortgage is a non-conforming loan which would generally be considered higher-risk, eg, loans made to people with excessive debt, low or no income, inadequate down payment or security/collateral for the loan, no work history, or credit scores <600.
18. Renovation or Construction Mortgage
A mortgage involving a builder or contractor financing component for construction or renovations.
19. Land Contract (Seller Financing)
Seller financing, aka land contract, is when a seller finances the sale of a property themselves. Often this involves a balloon payment at the end of the term of the loan, a down payment, and interest. A seller will often review the purchaser’s financial credentials. Vacant land is popular for land contracts.
An option is a contract or clause which allows an option holder the right to buy a piece of real estate, often at a pre-arranged price. These can be nice for the purpose of tying up a property until funding or financing is more available, with the main risk being that if you do not invoke the option to buy the property then any money paid for the option could be wasted.
21. “Clear to Close” (CTC)
Clear to close is the industry term for a borrower’s loan getting final approval from a bank. Closings are scheduled after the borrower issues a final loan approval, or “clear to close”.
An appraisal is an opinion of value in the form of a uniform appraisal report done by a licensed appraiser, most often for the purpose of establishing the value of collateral for a mortgage loan. If you buy a house with a mortgage your lender will want to make sure the value is there before they loan against it in case the buyer defaults and they need to foreclose.
Example: Suzy bought a condo in Ypsilanti for $100,000 but it appraised for $120,000 suggesting she would have immediate equity in her new purchase!
Transaction & Offer Terminology
LP – List Price, Asking Price
The price a seller is requesting for a property listed for sale.
SP – Sold Price, Closed Price
The price a home sold for at closing, after inspections and appraisals and any other conditions and/or concessions.
Example: We listed an Ypsilanti condo for $100,000 but some issues came up during inspection so we reduced that price to $95,000 and that was the price we closed for.
Offer Acceptance, or “Opening Escrow”
Once a seller and a buyer have agreed to all terms in writing, and fully signed (ratified) their purchase agreement, this is called “opening escrow” which references the third-party title company who will often hold the earnest money deposit while the sale moves forward.
A backup offer, in real estate, is an offer made by a potential home buyer on a property that is already under contract with another buyer. If a buyer is in contract to purchase a home, but decides to withdraw from that contract for whatever reason (eg, financing difficulties or inspection concerns), an executed backup contract would automatically become the primary purchase contract. This clause is frequently seen in markets where there is high demand for certain properties, and if a desirable property attracts multiple offers it is fairly common for the seller to select the best and highest offer while also inquiring if the buyer who made the next-best offer would be willing to take backup offer position in case the accepted offer withdraws for any reason. With accepted backup terms the home would go to the backup purchaser rather than back “active” on the market for sale if the original purchaser withdraws.
EMD – Earnest Money Deposit
Also called “get serious money“, this is a deposit a buyer provides in a real estate purchase offer, usually paid in the form of a personal check, which is held by a broker or title company in a trust account to be applied towards the purchase price at closing. The buyer offers an earnest money deposit (EMD) to show their earnestness in a property and intention to abide by the terms of the purchase agreement on-time since time is of the essence in most real estate transactions. Sellers usually want a reasonable earnest money deposit amount in order for them to accept a purchase agreement and take a property off the market while a buyer conducts their due diligence and obtains any necessary financing, inspections, appraisals and any other requirements to close their purchase. Depending on contract terms, the EMD can be forfeited or subject to legal contest if the buyer defaults on the purchase agreement.
Example: Sally Homebuyer offered Tom Homeowner $100,000 with a $5000 EMD for the house at 123 Main St in Ann Arbor, MI.
POF – Proof of Funds
Show me the money! Proof of funds are statements, such as bank statements, included in an offer package which shows a seller that a buyer has the necessary cash on-hand in order to complete a sale as offered.
Example: Sally was sure to include a bank statement as proof of funds to show she was qualified to purchase Sam’s rare waterfront Cliffs condo in Ypsilanti.
Closing Date or Settlement Date
A settlement/closing is when the buyer and seller complete a transaction, usually with a third party title company who handles the conveyance of the deed from seller to buyer, records the sale with the municipal registrar, and disburses funds to any parties at the closing table.
Example: “It’s time to pop the champagne, we’ve finally closed on our new house!”
DOM – Days On Market
This refers to how many days a property has been actively available for sale on the market, prior to its owner accepting an offer or otherwise taking the property off the market. The average days on the market for an area is a key market indicator.
Example: Larry’s Agent knew that homes in Water Hill were selling in an average 5 days on market, so he urged Larry to come see the home immediately.
KMI or Key Market Indicator
Key market indicators are a real estate professional’s primary metrics for evaluating market conditions for buyers and sellers.
40. SP:LP Ratio or SP:LP%
The ratio between list price and sales price. This average ratio for an area is a key market indicator for the purpose of determining market conditions and trends favoring either sellers or buyers.
Example: If homes are selling for an average of 5% above list price then the sale price to list price ratio would be 105% which is indicative of a seller’s market.
41. CMA – Comparative Market Analysis
A report created by a real estate agent for the purpose of studying market indicators and comparable sales for the purpose of establishing market value and pricing strategies.
42. Comps – Comparable Sales
Comps are recent nearby sales which are of a similar size, vintage, or type to a property for the purpose of computing the property’s anticipated market value.
43. BPO – Broker Price Opinion
A broker’s opinion of value for a property which is often put into a report format similar to a market analysis. A BPO is not a substitute for a lender’s appraisal.
Lenders often order BPOs thru real estate brokers when mortgagors, or borrowers, are late on their mortgage payments.
44. Absorption Rate
Absorption rate is a key market indicator which shows the rate at which homes sell in an area over a certain period. By looking at absorption rates over previous sales periods, a listing agent approximate how long a property will take to sell.
Example: if 48 homes were sold in Depot Town over the past 12mo, then the rate of absorption would be
45. Seller’s Disclosures
This refers to the state-mandated seller’s disclosures forms which sellers of residential single-family and multi-family properties w/ 4 or fewer units are required to complete.
46. LBP – Lead Based Paint
Lead-based paint refers to lead-based paint which exists in a large number of historic homes built prior to 1978. If you’re looking at historic homes in Ann Arbor or Ypsilanti there is a high likelihood the home may have lead paint; read more about lead paint here: https://www.epa.gov/lead/protect-your-family-lead-your-home
47. PA – Purchase Agreement or ‘purchase offer’
The purchase agreement is a binding sales offer to purchase real property containing offer terms such as the offer price, closing date, and any contingencies or additional terms.
48. ERTS – Exclusive Right To Sell, AKA Listing Agreement
The agreement signed which covers hiring terms, commissions, and marketing of real property for sale through a listing agent.
49. LA – Listing Agent, AKA Seller’s Agent
This is a real estate salesperson who has been hired by a seller to manage the sale of real property. The seller’s agent’s job is to assist the seller and make them the most amount of money possible in any real estate negotiations.
50. Real Property, AKA Real Estate
Land, and the buildings on it, are real estate.
51. Closing Costs
The additional costs incurred by buyers and sellers at closing, including but not limited to: Commissions, title fees, registration fees, transfer taxes, doc fees, closing fees, etc. A good agent will help their client avoid as many unnecessary closing fees as possible. Feel free to contact us to find out exactly how we would help you avoid unnecessary fees according to your specific situation.
52. Concessions, seller-paid closing costs
Concessions, or seller-paid closing costs, are fees which are not customarily paid by a buyer or a seller but for whatever reason have been negotiated into a contract for that party to pay.
Example: Sam is buying a home with a VA loan (thank you for serving) so that he can purchase with as little down payment as possible, so he made an attractive offer on a home in Ann Arbor stipulating that the seller would pay $3000 in concessions towards Sam to offset his other closing costs.
Contingencies are conditions built into a property which must be satisfied in order for a purchase to complete a sale.
Example: Sally Homebuyer is buying a home contingent on her satisfactory results of a private contractor’s inspection and contingent on her being approved to obtain a mortgage.
A written change/amendment to a listing agreement or purchase agreement.
Example: Sally Homebuyer negotiated some repairs to be paid by Tom Homeseller so they signed an addendum to their purchase agreement specifying that change.
55. Net Sheet
A net sheet, or preliminary net sheet, itemizes all closing costs in a summary for either seller(s) or buyer(s) of real estate.
Example: Online net sheet calculator
56. Closing Statement
The statement at closing showing a buyer and seller all itemized costs, prorations, fees, and credits.
57. TC – Transaction Coordinator
A transaction coordinator is a non-fiduciary contractor who is handling the coordination of a sale without representing either buyer or seller as an agent. The TC manages deadlines and contract terms to get them through completion, but usually will not negotiate the contract for either buyer or seller.
Example: Sam’s uncle promised to sell him a condominium for the price he acquired it for (or for a considerable discount below market); so Sam had Debbie the Realtor handle the sale as a transaction coordinator for a flat fee.
58. TID or PID – Property or Tax ID Number
For the purpose of taxation and assessment, this is a short numeric code used to identify a specific piece of real estate
Example: K-11-36-300-038, or alternatively, K01136300038
59. Legal Description
This is a specific way to identify a property which is used in purchase contracts and by assessors and county treasurers. Some legal descriptions reference platted subdivisions based on the property’s lot number while others contain more detailed metes and bounds descriptions of a property’s lot which are based on compass angles and stakes or other landmarks.
Example of a metes and bounds legal description: SW 1/4 SEC 36, T3S, R7E, YPSILANTI TWP,, WASH CTY, MI, DESC AS: COM AT W 1/4 COR SEC 36, N 89-40-40 E 842.91 FT ALG E/W 1/4 LN SEC 36, BEING C/L MARTZ RD 66′ WD TO POB, TH N 89-40-40 E 188.86 FT, TH S 00-05-38 E 300 FT TO SET IRON, TH N 89-40-40 E 29 0 FT TO SET IRON, TH S 00-05-38 E 347.53 FT TO SET IRON, TH S 89-58-35 W 1322.55 FT, TH N 00-01-25 W 155.64 FT ALG W/L SEC 36 BEING C/L BUNTON RD 66′ WD, TH N 89-40-40 E 843.50 FT TO SET IRON, TH N 00-05-38 W 485 FT TO POB. CONT 8.164 AC + -. SUBJ TO RIGHT OF PUBL OVER N & W 33 FT FOR RD & ESMTS & ROW OF RECORD, IF ANY. PARENT PARCEL K 11-36-300-026
Foreclosure Terms & Federal Government Real Estate Organizations
60. HUD – US Dept. of Housing and Urban Development
HUD is actually a department in the executive branch of the US gov’t; HUD both owns and sells Federally-owned real estate assets along with funding US mortgages through banks and credit unions. HUD’s inventory can be found their website, HUDhomestore.com
61. FHA – Federal Housing Administration
FHA is a US Federal gov’t agency within HUD which establishes underwriting guidelines for residential mortgages and also insures them. FHA offers low-down loans for residential homebuyers and some multi-family properties.
62. MSHDA – Michigan State Housing Development Authority
MSHDA is a state agency, which also functions in some ways as an enterprise, which handles many functions including managing state housing funds and loan programs. MSHDA offers periodical homebuyer assistance and down payment programs which, depending on the program, can be in the form of grant funding or loans. MSHDA is also a procedural entity in foreclosures, taxation and tax exemptions, and other regulations.
63. FHLMC – Freddie Mac – the Federal Home Loan Mortgage Corporation
Freddie Mac is a gov’t-sponsored enterprise (a public-private hybrid, publicly traded) with a direct line to the US Treasury, which buys mortgages from banks and establishes underwriting guidelines for loans.
64. FNMA – Fannie Mae – the Federal National Mortgage Association
Fannie Mae is a gov’t sponsored enterprise (a public-private hybrid, publicly traded) which is also involved in facilitating mortgage lending but goes a step farther than Freddie by also handling the resale of assets which went through foreclosure on their Homepath.com website.
65. GNMA – Ginnie Mae – The Government National Mortgage Association
Ginnie, like Freddie and Fannie, is also involved in the facilitation of mortgage lending but specifically through gov’t-guaranteed loans issued by gov’t agencies like HUD, the VA, and the USDA RD. All GNMA’s securities are backed by the “full faith and credit” guaranty of the US Gov’t.
66. SLM Corporation – Sallie Mae – The Student Loan Marketing Corporation
The largest private student loan corporation– formerly a government enterprise. Many borrowers have student debt from Sallie Mae which may affect their housing affordability options.
Real Estate Agency Terms
67. Brokerage, Brokerage House
A brokerage entity, or corporation, which is managed by a principle broker for the purpose of handling real estate sales as an intermediary.
68. BIC – Broker In Charge, ‘Principle Broker’ or ‘Broker of Record’
The employing broker of a real estate firm who holds the highest license category for real estate sales in Michigan, this person may (or may not) also supervise other real estate salespeople which can involve mentorship, training and management. The broker of record, or BIC, is ultimately responsible for the sales of the agents they supervise– similar to how a principle contractor may or may not hire other builders as subcontractors for one of their projects.
Example: Alexander is the broker of record @ Munro Real Estate, a boutique firm specializing in land and historic Ypsilanti real estate.
69. Associate Broker
This is a real estate salesperson who has acquired a broker’s license but is still working as an associate thru another employing broker.
70. Real Estate Salesperson
This is a real estate professional licensed by the state for the purpose of selling real estate as an intermediary. In Michigan, real estate salespeople must be licensed through a supervisory employing broker– sort of like how a journeyman plumber must be employed by a master plumber.
The term Realtor® is a trademarked term owned by the National Association of Realtors® to denote a real estate salesperson who is a member of that professional organization and subject to the NAR’s code of ethics in addition to all applicable state licensing requirements.
72. TC – Transaction Coordinator
Transaction coordinators are non-fiduciary representatives, often real estate agents, who are not working as the fiduciary representative of either a buyer or a seller. Buyers should note: some real estate agents, especially agents on larger teams, will require their clients to pay additional fees at closing for transaction coordination. Our policy at Munro Real Estate is not to charge extra for that.
Example: Sam wanted to purchase a condo in Ypsi from his uncle, at a discounted rate which they negotiated on their own, so he hired Tommy, an Ypsilanti broker, to manage the transaction for a flat fee to ensure a smooth closing.
73. BOR – Board of Realtors®
A local chapter of Realtors which handles responsibilities including, but not limited to: creating and updating customary local purchase agreements, managing grievances between agents and clients, enforcing compliance with the NAR code of ethics, managing and enforcing data and listing standards in our local MLS.
Local MLS Terms & Statuses
74. MLS – Multiple Listing System
The multiple listing services are portals maintained by local Boards of Realtors (BORs); these are the portals that agents input properties into, which syndicate data to all of the popular online real estate portals, including www.MunroPros.com.
75. MFR, SFR
Stands for multi-family residential and single family residential properties, respectfully. Commercial income properties generally consist of 5 or more units.
76. CCS/CTS – Continue to Show (“CCS”, ‘contingent continue to show’, “under contract”)
A property goes “under contract” when the seller accepts an offer in writing with all terms agreed upon by the buyer and seller. CCS is an MLS status for properties with accepted contracts which still have contingencies to be completed, eg, inspection or financing contingencies.
77. PEND – Pending
Pending is basically when a contract exists for a property,
78. LTC – Limited Time Clause
The LTC MLS status, or limited time clause, indicates that there is an accepted offer with a limited-time contingency in play.
Example: Sam saw a home in Ann Arbor which was already under contract, but asked his agent about it anyways. His agent found that the home was under contract but had a limited time contingency for the home’s current buyer to sell their existing home in order to purchase the home that Sam has interest in. Since that limited time contingency ended next week, Sam was able to offer on the property and take over primary contract position because the first buyer’s contingency had expired due to them being unable to sell their home in time.
79. UW – Unconditionally Withdrawn
A home which was listed thru a real estate agent but was withdrawn and is no longer subject to the terms of the listing agreement.
80. CW – Conditionally / Temporarily Withdrawn
Real estate which was listed thru a real estate agent, and is still under the terms of their listing agreement but was taken off the market temporarily for some reason.
Example: Homeowner lists a home with MRED, and after a couple of weeks with no showings the homeowner decides to temporarily withdraw the listing while they remodel the kitchen over the next 2 weeks to help sell the home.
81. EXP – Expired
Code or a descriptor for a home which was listed thru an agent with a listing agreement which has lapsed, resulting in the home “expiring” and coming off the market.
82. FSBO – For Sale By Owner
A home which is listed for sale by the owner directly, rather than through a listing agent.