The world of real estate can be overwhelming for beginners, especially with the abundance of specialized real estate terms that often appear in contracts, listings, and legal documents. Whether you’re a first-time property owner, a budding real estate investor, or someone exploring opportunities in the real estate business, it’s important to understand the language used in real estate transactions to avoid confusion and costly mistakes.
Knowing the right real estate words can help you confidently navigate everything from purchasing raw land to managing an investment property or understanding joint ownership. These terms aren’t just technical, they define how real property and personal property are treated under the law, how property ownership is established, and how real estate tax is computed.
They also impact how real estate agents, real estate brokers, and professionals in real estate development or real estate management handle every stage of the property cycle. For example, understanding the difference between fair market value and market value can significantly affect your purchase price negotiations.
Similarly, terms like earnest money and fair market play a crucial role when selling real estate or investing in the same property under different conditions. In the real estate industry, professionals rely on this knowledge daily, and if you’re aiming to become part of it, or simply make a well-informed decision as a buyer, it pays to be prepared.
This blog will walk you through ten essential real estate terms that can guide you through your journey, whether you’re purchasing your first home or expanding your real estate investment portfolio. In the Philippines, one of the most popular types of property is the house and lot.
This refers to real property that includes both a residential structure and a designated land area. A pioneer in offering house-and-lot packages was Camella, which revolutionized the real estate development scene by selling homes bundled with land during a time when subdivisions usually offered lots only.
Today, house and lots for sale remain the top choice for many buyers. The purchase price is typically higher than for vacant land or condominiums, as it reflects both the home and the land’s market value. However, it’s an attractive option because owning a home also means owning a parcel of private property, a tangible symbol of long-term security and property ownership.
Real Estate Words that Matter
Navigating the world of real estate means encountering complex terms that carry serious financial and legal weight. Whether you’re buying a residential property, investing in commercial property, or exploring an income property, understanding the terminology can make or break a deal.
For instance, knowing the difference between a buyer’s agent and a selling agent, or understanding what a legally binding contract entails in a purchase agreement, can help you avoid costly misunderstandings. Terms like gross selling price, sales price, and contract price often appear in listings and documents, but each represents a different aspect of the property’s value or the property acquired.
A mortgage broker might help you secure financing, perhaps even with an interest only loan, while the interest rate, often influenced by the Federal Reserve Bank, plays a critical role in your overall payment terms. You’ll also encounter closing costs, property taxes, and possibly title insurance company fees before taking ownership.
If you’re purchasing a life estate, dealing with adverse possession, or securing community property, the complexity increases. Even less common terms like blanket mortgage or air space can surface when dealing with unique properties. Some agreements involve a neutral third party to facilitate transactions, ensuring both the seller’s property and buyer’s rights are protected.
Looking at recently sold properties can help you gauge market trends and estimate the land owned or property’s value in your area. A solid understanding of this real estate glossary ensures that every step—from negotiation to closing—is handled with clarity and confidence.
Agent/Real Estate Agent
Real estate agents are licensed real estate professionals that help you arrange and represent your property transactions. Generally, agents are intermediaries between a property buyer and a seller. The seller could either be an individual or a real estate developer.
Real estate agents are basically bridges that fulfill the sale for both the buyer and the seller. Real estate agents are sometimes referred to as brokers or real estate salespersons, depending on who they represent.
Open House
An open house is an event where a property is opened for property viewing. This is common for real estate developers in the Philippines. A potential buyer can schedule a visit and inspect the property they are eyeing to buy. An open house visit is an advantage for potential buyers because it allows them to experience the property firsthand.
Site Tripping
Site tripping is the less formal term used to refer to a site visit, tour, or viewing. As an open house, this is when a prospecting homebuyer checks a property they want to buy. But while an open house needs an actual house, a site tripping includes visiting a lot or a master-planned community where you want to invest in.
This also means you get a tour around the real estate development, not just your house. This way, you get to see the amenities and other establishments available in the community. However, due to the pandemic, many are having a hard time scheduling site visits. Fortunately, trusted house and lot developers like Camella have made virtual galleries available as an alternative. Here, property buyers can check every corner of the available house and lots for sale conveniently.
Reservation Fee
For a buyer who decided to invest in a property, especially on an exclusive subdivision, the reservation fee is the first payment they will ever make. Payment of the reservation fee is the first step in acquiring a property. Once paid, a property is considered to be sold to the property buyer. It is when the deal is deemed to be closed.
Closing
A real estate property is closed when the sale is deemed final. In application, this is when the buyer pays the reservation fee if there are any. This is when all parties have signed all required documents. And finally, the buyer is now considered the property’s new owner.
Equity
Equity is the asset you have in your home. It is the market value of your investment after deducting what you owe in the bank or any financial body. In simpler terms, it is what’s left in your assets after paying your debts if you were to sell your property.
Suppose you buy a real estate property worth 1.2 million pesos for a million pesos. In that case, you already gain instant equity because there is a 200,000 difference between the value and the cost. When you sell the property you bought for 1,000,000 for 1,500,000, you’ll get to keep the equity. That leaves 500,000 after the close, once all the expenses are paid.
As real property owners, it is important to build equity for this kind of financial asset. It can be leveraged to obtain, for example, loans to help you finance items such as house repairs or to pay off higher-interest debts.
Amortization
When acquiring real estate properties, you will likely finance them with a loan. The amortization is the schedule of your monthly loan payments. It is the total of the interest and the principal divided by the specified number of years. The amortization schedule also includes the breakdown of how much goes to the principal and the interest.
Interest
When you get a loan for your real estate investment, expect that you will pay interest. Interest is the cost you pay for borrowing money from a lender. It is usually expressed as a yearly percentage, which is commonly known as the interest rate. This is then paid as part of your amortization. At the beginning of your payments, most of your monthly payments will be applied to the interest and the rest to the principal. As you continue with your payments, the interest amount will decrease, and more of your payments will be put towards the mortgage balance. This is because interests are calculated based on the remaining principal balance and not the original loan amount. After making many payments, you will notice that the interest amount is decreasing. The lower that principal amount, the lower the interest.
HOA
HOA is short for homeowners’ association, which is a private association of all the investors or homeowners in a real estate development. This association manages the master-planned communities or a condominium. By purchasing a property managed by an HOA, you agree to their rules and pay the monthly or annual dues.
Earnest Money
Earnest money is a deposit made by the buyer to show serious intent to purchase a property. It serves as a good faith gesture and is usually held by a neutral third party or escrow agent until the purchase agreement is finalized. If the deal goes through, the earnest money is typically applied to the closing costs or down payment. If the buyer backs out for reasons not outlined in the contract, they may forfeit the deposit.
Closing Costs
Closing costs refer to the fees and expenses—aside from the sales price of the home—that buyers and sellers pay to finalize a real estate transaction. These may include title insurance, loan processing fees, attorney’s fees, taxes, and other charges. Typically paid at the time of property transfer, closing costs can amount to 2–5% of the gross selling price of the home.
Buyer’s Agent
A buyer’s agent is a licensed real estate agent who represents the interests of the buyer in a transaction. They assist in property searches, negotiations, and guiding the buyer through legal documents such as the legally binding contract or purchase agreement. Their role is to ensure that the buyer gets the best possible deal and is protected throughout the buying process.
Fixed Rate Mortgage
A fixed rate mortgage is a type of home loan where the interest rate remains the same throughout the life of the loan. This provides consistent monthly payments and long-term predictability for the property owner, making it a popular choice for those seeking stability in their finances. It differs from adjustable-rate loans, which can fluctuate based on market conditions or decisions made by the Federal Reserve Bank.
Learning the Buying Process in Real Estate Development
Now that you are familiar with essential real estate words, it’s time to understand how the buying process works, especially within the context of real estate development. Whether you’re a first-time property owner, a seasoned real estate investor, or simply interested in expanding your real estate investment portfolio, having a clear grasp of each step ensures smoother real estate transactions and smarter decisions.
In the real estate industry, every purchase involves legal, financial, and logistical considerations. You’re not just dealing with real property, which refers to land and anything permanently attached to it, but also with various elements like personal property, private property, and potential for investment property income.
These classifications play a significant role in determining the fair market value and market value of the property, as well as applicable real estate tax obligations. At Camella, one of the pioneers in Philippine real estate development and real estate management, buying a house and lot can be simplified into four major steps:
Step 1: House Selection
Choose the real estate property that suits your lifestyle, budget, and goals. This could range from raw land for future building to a fully developed residential property or investment property. Consider the fair market and the purchase price, which may vary depending on location, structure, and the market value of the same property in surrounding areas.
