Real estate glossary

Above-grade square footage

The finished living space in a home that is at or above ground level. In North Carolina, appraisers and MLS listings typically report above-grade and below-grade square footage separately. Above-grade square footage is weighted more heavily in appraisals than basement or below-grade space.

Adjustable-rate mortgage (ARM)

A mortgage where the interest rate changes periodically after an initial fixed period. A 5/1 ARM has a fixed rate for five years, then adjusts annually. ARMs can be beneficial if you plan to sell or refinance before the adjustment period begins.

Amortization

The process of paying off a loan through regular scheduled payments over time. Each payment covers both principal and interest, with the proportion shifting over the life of the loan — early payments are mostly interest, later payments are mostly principal.

Appraisal

An independent assessment of a property's market value conducted by a licensed appraiser. Lenders require appraisals on purchase transactions to confirm the home is worth at least the purchase price before funding the loan.

As-is

A term indicating the seller will make no repairs and the buyer accepts the property in its current condition. Buyers can still conduct inspections and walk away during due diligence — buying as-is does not waive your right to inspect, only your right to request repairs.

Attorney fee

In North Carolina, real estate closings are conducted by a licensed real estate attorney rather than a title company. Attorney fees are a closing cost typically ranging from $700–$1,500 depending on the transaction.

Below-grade square footage

Finished living space that is partially or fully below ground level, such as a basement. Below-grade square footage is valued at a lower rate per square foot than above-grade space in appraisals — typically 50–60% of the above-grade rate.

Broker in Charge (BIC)

A licensed North Carolina real estate broker who is responsible for the supervision of a real estate firm and its agents. The BIC is accountable for the firm's compliance with NC real estate law.

Buyer agency agreement

A written contract between a buyer and a buyer's agent that establishes the terms of representation, including the agent's compensation, the duration of the agreement, and the properties covered. In North Carolina, a buyer agency agreement must be signed before an agent can show you a property — a requirement that became mandatory under the 2024 NAR settlement.

Buyer agent commission

The compensation paid to a buyer's agent, typically expressed as a percentage of the purchase price. This commission is traditionally paid by the seller or builder from the proceeds of the sale. In most Triangle transactions, buyer agent commissions range from 2–3%.

Buyer rebate

A credit from a buyer's agent to their client at closing, funded from the agent's commission. Buyer rebates are legal in North Carolina and appear as a line item on the Closing Disclosure. At Sakan Properties, we keep a flat 1% and rebate the remainder to the buyer.

Buydown

A way of reducing a mortgage interest rate by paying discount points upfront at closing. A permanent buydown reduces the rate for the life of the loan. A temporary buydown (such as a 2-1 buydown) reduces the rate for the first one to three years, then steps up to the permanent rate.

Cash to close

The total amount a buyer must bring to the closing table on closing day. Cash to close includes the down payment, closing costs, prepaid items, and any adjustments — minus any credits from the seller or buyer's agent rebate.

Clear title

A property title that has no liens, claims, disputes, or other encumbrances that could affect ownership. Lenders require clear title before funding a mortgage. A title search and title insurance protect buyers and lenders against title defects.

Closing

The final step in a real estate transaction where ownership of the property transfers from the seller to the buyer. In North Carolina, closings are conducted by a real estate attorney. All documents are signed, funds are disbursed, and the deed is recorded at closing.

Closing costs

Fees and expenses associated with completing a real estate transaction, separate from the down payment. Closing costs in North Carolina typically range from 2–5% of the purchase price and include lender fees, attorney fees, title insurance, prepaid taxes and insurance, and recording fees.

Closing Disclosure (CD)

A standardized five-page document provided by the lender at least three business days before closing that details all loan terms, monthly payments, fees, and cash to close. The buyer's agent rebate appears on Page 3 under "Other Credits."

Comparable sales (comps)

Recently sold properties similar in size, condition, location, and features to the property being evaluated. Comps are used by appraisers, agents, and buyers to determine market value. A Comparative Market Analysis (CMA) is a report prepared by an agent using comparable sales.

Comparative Market Analysis (CMA)

A report prepared by a real estate agent that analyzes comparable sales to estimate a property's current market value. A CMA is not a formal appraisal but serves as an important tool for buyers and sellers in pricing and negotiation.

Concession

A contribution from the seller toward the buyer's closing costs or other transaction expenses. Also called a seller credit or seller concession. Concessions are negotiated as part of the purchase contract and must be disclosed to and approved by the lender.

Contingency

A condition that must be met for a real estate contract to proceed. Common contingencies include financing contingency, appraisal contingency, and inspection contingency. In North Carolina, the due diligence period serves as the primary contingency mechanism.

Conventional loan

A mortgage that is not backed by a government agency such as the FHA, VA, or USDA. Conventional loans typically require a higher credit score and down payment than government-backed loans but offer more flexibility in property types and loan structures.

Crawl space

A shallow, unfinished space beneath a home's floor that provides access to plumbing, electrical, and structural elements. Crawl spaces are common in North Carolina homes and should be inspected for moisture, pests, and structural integrity during due diligence.

Days on market (DOM)

The number of days a property has been listed for sale on the MLS. A high DOM can indicate overpricing, condition issues, or low buyer demand. In the Triangle market, a property sitting for 30 or more days typically gives buyers more negotiating leverage.

Debt-to-income ratio (DTI)

A calculation lenders use to assess a borrower's ability to repay a loan. DTI is expressed as the percentage of gross monthly income that goes toward debt payments. Most conventional lenders prefer a DTI of 43% or below, though some programs allow higher.

Deed

A legal document that transfers ownership of real property from one party to another. In North Carolina, the deed is recorded with the county Register of Deeds at closing.

Discount points

Fees paid at closing to reduce the mortgage interest rate. One point equals 1% of the loan amount. The rate reduction per point varies by lender but is typically approximately 0.25% per point. Discount points can be funded using a buyer agent rebate or seller concession.

Down payment

The portion of the purchase price paid by the buyer upfront, not financed through a mortgage. Down payment requirements vary by loan type — conventional loans typically require 3–20%, FHA loans 3.5%, and VA and USDA loans may require no down payment.

Due diligence

In North Carolina, the contractual period during which a buyer has the right to investigate a property and withdraw from the contract for any reason. The due diligence period begins at contract execution and ends on the due diligence deadline specified in the Offer to Purchase.

Due diligence fee

A non-refundable fee paid by the buyer directly to the seller at the time of contract execution in North Carolina. The due diligence fee compensates the seller for taking the property off the market while the buyer investigates. If the buyer terminates before the due diligence deadline, the seller keeps the fee. If the transaction closes, the fee is credited to the buyer at closing.

Earnest money deposit (EMD)

A good-faith deposit made by the buyer when a purchase contract is executed in North Carolina. Unlike the due diligence fee, earnest money is refundable if the buyer terminates before the due diligence deadline. If the buyer defaults after the due diligence period, the seller may retain the earnest money. EMD is held in escrow and credited to the buyer at closing.

Easement

A legal right that allows someone other than the property owner to use a portion of the property for a specific purpose, such as a utility easement for power lines or a shared driveway. Easements are disclosed in the title search and run with the land.

Equity

The difference between a property's market value and the outstanding balance on any mortgages or liens. Equity builds over time as the mortgage is paid down and/or the property appreciates in value.

Escrow

A neutral third-party arrangement where funds or documents are held until conditions of a transaction are met. In North Carolina, earnest money is held in escrow by the closing attorney or the listing broker's firm.

Fair Housing Act

A federal law that prohibits discrimination in housing based on race, color, national origin, religion, sex, familial status, and disability. Real estate agents are required to comply with Fair Housing laws in all aspects of representation.

FHA loan

A mortgage insured by the Federal Housing Administration. FHA loans allow lower credit scores and down payments as low as 3.5%. They require mortgage insurance premiums regardless of down payment amount.

Fixed-rate mortgage

A mortgage where the interest rate remains the same for the entire loan term. Monthly principal and interest payments never change. Fixed-rate mortgages provide payment certainty and are the most common mortgage type for Triangle buyers.

Flood zone

A geographic area designated by FEMA based on flood risk. Properties in high-risk flood zones typically require flood insurance as a condition of financing. Buyers should check flood zone status during due diligence.

For Sale By Owner (FSBO)

A property listed for sale directly by the owner without a listing agent. FSBO sellers may or may not offer buyer agent compensation. Buyers working with Sakan Properties on FSBO transactions should confirm compensation terms before proceeding.

Good faith estimate

A preliminary estimate of closing costs previously provided by lenders. The modern equivalent is the Loan Estimate, which lenders must provide within three business days of a loan application.

HOA (Homeowners Association)

An organization that governs a community of homes or condominiums and enforces rules, maintains common areas, and collects dues. HOA fees and rules should be reviewed during due diligence.

Home inspection

A visual examination of a property's major systems and structure conducted by a licensed inspector during due diligence. A home inspection covers the roof, foundation, HVAC, plumbing, electrical, and other systems.

Home warranty

An optional service contract that covers repair or replacement of major home systems and appliances. Sellers may offer a home warranty as a selling incentive, or buyers may purchase one during due diligence.

Interest rate

The percentage of the loan amount charged by the lender for borrowing money, expressed as an annual rate. The interest rate determines the cost of borrowing and directly affects monthly mortgage payments.

Joint tenancy

A form of property ownership where two or more people own equal shares with right of survivorship — meaning if one owner dies, their share automatically passes to the surviving owner(s). Common for married couples in North Carolina.

Jumbo loan

A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac. In most Triangle counties, the 2026 conforming loan limit is $766,550. Loans above this amount are considered jumbo loans and typically have stricter qualification requirements.

Lien

A legal claim against a property as security for a debt. Common liens include mortgage liens, tax liens, and mechanic's liens. A title search during due diligence identifies all liens on a property.

List price

The price at which a property is offered for sale by the seller. The list price is not necessarily the market value or the price at which the property will sell.

Loan estimate

A standardized three-page document provided by the lender within three business days of a mortgage application that outlines estimated loan terms, monthly payments, and closing costs.

Loan-to-value ratio (LTV)

The ratio of the mortgage amount to the appraised value of the property, expressed as a percentage. Most conventional loans require an LTV of 80% or below to avoid private mortgage insurance.

Market value

The price a property would sell for in an arm's-length transaction between a willing buyer and willing seller, both with reasonable knowledge of the facts.

MLS (Multiple Listing Service)

A database of properties listed for sale by real estate brokers in a specific market. The Triangle MLS covers Wake, Durham, Orange, Johnston, and surrounding counties.

Mortgage insurance

Insurance that protects the lender if the borrower defaults on the loan. Required on conventional loans with less than 20% down (PMI) and on all FHA loans (MIP). VA and USDA loans do not require mortgage insurance.

NAR settlement

The 2024 settlement between the National Association of Realtors and plaintiffs in antitrust lawsuits, which changed how buyer agent compensation is handled in the United States. Buyer agency agreements must now be signed before showings, and buyer agent compensation can no longer be advertised on the MLS.

North Carolina Real Estate Commission (NCREC)

The state agency that licenses and regulates real estate brokers and firms in North Carolina. The NCREC establishes rules for broker conduct, education requirements, and consumer protection standards.

Offer to Purchase and Contract (Form 2-T)

The standard purchase contract used in North Carolina residential real estate transactions. The 2-T form includes the purchase price, due diligence fee, earnest money deposit, due diligence deadline, and closing date.

Original price

The initial list price of a property when it first came to market. Comparing the original price to the current list price shows whether a seller has reduced their asking price and by how much.

PITI

An acronym for the four components of a mortgage payment: Principal, Interest, Taxes, and Insurance.

Pre-approval

A lender's conditional commitment to loan a specific amount based on a review of the buyer's credit, income, assets, and employment. A pre-approval letter is typically required when making an offer in the Triangle market.

Pre-qualification

A preliminary estimate of how much a buyer may be able to borrow, based on self-reported financial information without a full credit check or documentation review. Less rigorous than a pre-approval and carries less weight with sellers.

Principal

The original loan amount borrowed, excluding interest. Each mortgage payment reduces the principal balance.

Private mortgage insurance (PMI)

Insurance required by lenders on conventional loans with less than 20% down payment. PMI protects the lender if the borrower defaults. PMI can be removed once the loan-to-value ratio reaches 80%.

Procuring cause

The legal principle in real estate that determines which agent is entitled to a commission based on their role in bringing about the sale. In new construction, a buyer who visits a model home without registering an agent may lose their right to have that agent represent them — and potentially lose their rebate eligibility.

Property disclosure

A written statement from the seller disclosing known material defects and conditions about the property. North Carolina requires sellers to complete a Residential Property and Owners' Association Disclosure Statement.

Ratified contract

A purchase contract that has been signed and accepted by all parties. In North Carolina, a contract is ratified when the seller signs the buyer's offer or counteroffer and delivers that acceptance to the buyer.

Real estate attorney

In North Carolina, all real estate closings must be conducted by a licensed real estate attorney. The closing attorney conducts the title search, prepares closing documents, holds funds in escrow, and records the deed.

Recording

The process of filing a deed or other legal document with the county Register of Deeds to create a public record of ownership. Recording the deed is the final step at closing and officially transfers title to the buyer.

Refinance

Replacing an existing mortgage with a new one, typically to obtain a lower interest rate, reduce the monthly payment, or change the loan term.

Sales price to list price ratio (SP/LP)

The ratio of the final sale price to the list price at the time of sale, expressed as a percentage. A ratio below 1.00 indicates the buyer negotiated a discount.

Special assessment

An additional charge levied by an HOA or municipality for a specific improvement or expense, separate from regular dues or taxes. Buyers should ask about pending special assessments during due diligence.

Survey

A professional measurement of a property's boundaries, improvements, and easements. Buyers purchasing a property with unclear boundaries should consider ordering a survey during due diligence.

Tenants in common

A form of property ownership where two or more people own shares in a property that may be unequal and do not automatically pass to surviving owners upon death.

Title

The legal right of ownership in a property. A clear title means the owner has the right to sell the property free of claims or encumbrances.

Title insurance

Insurance that protects against losses arising from title defects, liens, or ownership disputes. Lenders require a lender's title insurance policy. Buyers can also purchase an owner's title insurance policy for additional protection.

Title search

An examination of public records to verify the legal ownership of a property and identify any liens, encumbrances, easements, or title defects. Conducted by the closing attorney before closing.

Under contract

A property status indicating that a seller has accepted an offer and the transaction is in progress. The property is typically removed from the MLS or marked as pending.

USDA loan

A mortgage backed by the U.S. Department of Agriculture for buyers purchasing in eligible rural and suburban areas. USDA loans require no down payment. Some areas in the Triangle's outer counties — including parts of Johnston and Chatham — may qualify.

VA loan

A mortgage benefit available to eligible veterans, active-duty service members, and surviving spouses, backed by the U.S. Department of Veterans Affairs. VA loans require no down payment and no mortgage insurance.

Walkout basement

A basement with direct access to the outside at ground level, typically through a door or sliding glass door. Walkout basements allow natural light and direct outdoor access and are valued higher than standard below-grade basements in appraisals.

Walk-through

A final inspection of the property by the buyer, typically conducted within 24 hours of closing. The walk-through confirms the property is in the agreed-upon condition and any agreed-upon repairs have been completed.

Zoning

Local government regulations that control how land and buildings in specific areas can be used. Buyers should verify zoning if they have plans to modify, expand, or use the property in a non-standard way.