Real estate, in plain English

Every industry hides behind its vocabulary, and this one is worse than most — because the words show up on documents you're signing. Here are the terms that actually matter, defined the way I'd say them out loud, with a note on why each one is worth knowing.

15 of these work differently in Michigan than they do elsewhere. Those are marked — and they're the ones that cost people money.

1031 ExchangeTaxes · Money & costs: A tax provision letting an investor defer capital gains by rolling proceeds into another investment property.Why it matters. It applies to property held for business or investment — not to a home you live in. Strict deadlines and a qualified intermediary are required, so it's planned before a sale, never after.See also: Capital Gains
Absorption RateMarket: How fast homes sell in a market — the mechanism behind months of supply.Why it matters. A more technical way of saying the same thing: how quickly buyers are consuming available inventory.See also: Months of Supply
AmortizationMoney & costs: The schedule by which a loan is paid off — how each payment splits between interest and principal.Why it matters. Early payments are mostly interest, which surprises people. Equity builds slowly at first and accelerates, which is why the first few years feel like renting from a bank.Read more →See also: Principal See also: Equity
AppraisalBuying · Money & costs: A licensed appraiser's opinion of value, ordered by the lender after you're under contract.Why it matters. It exists to protect the bank's money, not to set your price. When the appraisal comes in below the agreed price, somebody has to cover the gap — and that negotiation is where deals most often come apart.See also: Comparative Market Analysis (CMA)See also: Automated Valuation Model (AVM)
Appraisal GapBuying · Contracts · Money & costs: The difference when a home appraises for less than the agreed price.Why it matters. Someone has to cover it — the buyer in cash, the seller by reducing, or the deal dies. An appraisal gap clause commits the buyer to covering it up to a stated amount.See also: Appraisal See also: Escalation Clause
Assessed ValueMichiganTaxes: The value a local assessor assigns to a property for tax purposes.Why it matters. In Michigan this is set at 50% of the assessor's estimate of market value — the SEV. It is not what your house would sell for.Read more →See also: State Equalized Value (SEV)See also: Taxable Value
Automated Valuation Model (AVM)Market · Selling: A computer's estimate of value, built from public records and nearby sales. Zillow's Zestimate is the famous one.Why it matters. Genuinely useful as a starting point and completely blind to your kitchen, your basement, and your block. Treat it like a weather forecast from three counties away.Read more →
Buyer Agency AgreementBuying · Contracts: A written agreement between a buyer and their agent, signed before touring homes, setting out the agent's duties and compensation.Why it matters. Required before touring since the 2024 NAR settlement. Compensation is negotiable, and buyers can ask a seller to cover it as a term of the offer.
Buyer's MarketMarket: More homes than buyers. Longer days on market, more negotiating room.Why it matters. Generally six-plus months of supply. Worth knowing what it looks like, because advice written for one market is often wrong in the other.See also: Months of Supply See also: Seller's Market
Capital GainsTaxes · Money & costs · Inheritance: Profit on the sale of an asset — for a home, the sale price minus your cost basis.Why it matters. Primary residences carry a large federal exclusion if you've lived there long enough. Investment property and inherited property follow different rules, and both are CPA territory.See also: Cost Basis See also: Stepped-Up Basis
Clear TitleContracts: Ownership with no liens, disputes, or defects that would interfere with transfer.Why it matters. What the title search is looking for and the title policy is insuring. Anything unresolved has to be cleared before closing, which is why title work starts early.See also: Title See also: Lien See also: Title Insurance
ClosingBuying · Selling · Money & costs: The meeting where ownership legally transfers — documents signed, money moved, keys handed over.Why it matters. Also called settlement. In Michigan it's usually handled by a title company rather than an attorney, and it's when every estimate you've been working from becomes a real number.Read more →See also: Settlement Statement See also: Closing Costs
Closing CostsBuying · Selling · Money & costs: The fees and charges paid at closing, beyond the price of the house itself.Why it matters. Freddie Mac puts typical buyer closing costs at 2–5% of the purchase price. Sellers have a separate set, including Michigan's transfer tax. Neither list is a surprise if you ask for it early.Read more →See also: Transfer Tax See also: Settlement Statement
Closing DisclosureBuying · Money & costs: The final itemized loan terms and costs, required to reach you at least three business days before closing.Why it matters. Compare it line by line against your Loan Estimate. That three-day window exists so you have time to catch a difference, and it's the last easy moment to ask.See also: Loan Estimate
Comparable Sales (Comps)Selling · Market: Recent sales of similar nearby homes, used to estimate what a property is worth today.Why it matters. The foundation of honest pricing. Ask which comps and why those — a real answer sounds like addresses and adjustments, not a range.Read more →See also: Comparative Market Analysis (CMA)See also: Appraisal
Comparative Market Analysis (CMA)Selling · Market: An agent's pricing analysis built from real, recent, nearby sales — adjusted for what makes your home different.Why it matters. The honest way to estimate what a buyer will actually pay. Ask which comps were used and why those; a real answer sounds like addresses and adjustments.Read more →
ContingencyBuying · Contracts: A condition in the contract that has to be met, or you can walk away without losing your deposit.Why it matters. Inspection, financing, and appraisal are the common ones. Waiving them makes an offer stronger and riskier in exactly equal measure.See also: Earnest Money
ContingentMarket: A listing status meaning an offer is accepted but conditions remain unmet.Why it matters. Not off the market in every sense — some sellers continue accepting backup offers.See also: Under Contract See also: Contingency
Cost BasisTaxes · Money & costs: The number the IRS treats as what a property cost you.Why it matters. It matters for exactly one reason: your taxable gain is the sale price minus your basis. Improvements can raise it, which is why keeping receipts is not pointless.See also: Capital Gains See also: Stepped-Up Basis
CounterofferContracts: A response that changes the terms of an offer, which legally rejects the original.Why it matters. Worth knowing: once you counter, the original offer is gone. You can't change your mind and accept it later if they walk.
Curb AppealSelling: How a property presents from the street — the first photo and the first impression.Why it matters. It sets expectations before anyone opens a door, and it's disproportionately cheap to improve compared to what it moves.Read more →
Date-of-Death ValueInheritance · Taxes: What a property was worth on the day its owner died — the number that sets an heir's cost basis.Why it matters. Get it documented early, while the evidence is fresh. Families who wait three years end up reconstructing a value nobody wrote down.Read more →See also: Stepped-Up Basis See also: Cost Basis
Days on Market (DOM)Market: How long a listing sat before going under contract.Why it matters. A low average makes a high individual number conspicuous. In a market averaging 19 days, a home sitting at 45 reads as a problem whether or not it is one.
Debt-to-Income (DTI)Buying · Money & costs: Your monthly debt payments divided by your gross monthly income.Why it matters. The constraint that usually decides how much you can borrow — more often than credit score or down payment. Paying off a car loan can move it meaningfully.
DeedContracts: The legal document that transfers ownership of real property from one party to another.Why it matters. Not the same as your mortgage, and not the same as the title. The deed is the instrument; the title is the ownership it conveys.See also: Title See also: Warranty Deed See also: Quit Claim Deed
Down PaymentBuying · Money & costs: The cash you put toward the purchase price, with the mortgage covering the rest.Why it matters. You do not need 20%. Conventional loans go to 3% for qualified buyers, FHA to 3.5%, and VA and USDA can reach zero. The 20% figure persists mostly because it avoids PMI.Read more →See also: Private Mortgage Insurance (PMI)See also: Loan-to-Value (LTV)
Dual AgencyMichiganContracts: One agent representing both buyer and seller in the same transaction.Why it matters. Legal in Michigan with written consent, and structurally compromised — the same person can't fully advocate for both sides of a negotiation. Ask how it would be handled before it comes up.
Due DiligenceBuying · Contracts: The investigation period after an offer is accepted — inspections, title review, verifying what you were told.Why it matters. Its length is negotiated, and a short one is a real concession in a competitive market. Waiving it entirely is a bet on everything being fine.See also: Contingency See also: Inspection
Earnest MoneyBuying · Contracts · Money & costs: A deposit submitted with your offer showing you're serious. Held in escrow and credited toward your costs at closing.Why it matters. You generally get it back if you walk for a reason your contract allows — and generally don't if you walk for one it doesn't. Read the contingency language before you sign.See also: Contingency See also: Escrow
EasementContracts: Someone else's legal right to use part of your land for a specific purpose.Why it matters. Utility access, a shared driveway, a neighbor's path to the lake. Permanent, binding on you, and disclosed in the title commitment — which is a document worth actually reading.
EncumbranceContracts: Anything that limits how a property can be used or transferred — a lien, an easement, a deed restriction.Why it matters. Not necessarily a problem. But every one of them travels with the property to you, so read the title commitment rather than skimming it.See also: Easement See also: Lien
EquityMoney & costs: What your home is worth minus what you still owe on it.Why it matters. Built two ways at once: paying down the loan, and the property appreciating. It's the thing renting can't produce.Read more →See also: Amortization See also: Principal
Escalation ClauseBuying · Contracts: An offer term that automatically raises your price if someone else bids higher, up to a ceiling you set.Why it matters. Useful in a market this tight, but it shows the seller your maximum. Whether that's worth it depends on how many offers you expect to be competing against.
EscrowMoney & costs · Contracts: Money held by a neutral third party — either your earnest money before closing, or your taxes and insurance collected monthly after.Why it matters. Two different things sharing one word, which is why the term confuses almost everyone. Context tells you which one is meant.
Escrow AccountMoney & costs · Taxes: A lender-held account collecting a slice of your taxes and insurance with each payment.Why it matters. Why your mortgage payment changes even on a fixed-rate loan — taxes go up, and the escrow adjusts. Different from the escrow that holds earnest money.See also: Escrow See also: Principal, Interest, Taxes, Insurance (PITI)
FixtureContracts: Something that started as personal property but became part of the house by being attached to it.Why it matters. The classic disputes: mounted TVs, chandeliers, built-in shelving, curtain rods. The test is roughly how permanently it's attached — but the reliable answer is to write it down.See also: Real Property See also: Personal Property
Highest and BestBuying · Market: A seller's request that all interested buyers submit their strongest offer by a deadline.Why it matters. It's an invitation, not an auction — the seller isn't obligated to take the biggest number, and terms often decide it.See also: Multiple Offer Situation
InspectionBuying: A professional walkthrough of the home's condition, paid for by the buyer.Why it matters. Not an appraisal and not a code enforcement visit. It's for you, and in a market where waiving it is common, understand exactly what you're giving up.See also: Due Diligence See also: Contingency
IntestateMichiganInheritance: Dying without a valid will. State law then determines who inherits.Why it matters. Michigan's rules may not match what the person would have chosen. It also tends to slow everything down, because the court has more to determine.Read more →See also: Probate
Letters of AuthorityMichiganInheritance · Contracts: The court document proving a personal representative can act for an estate.Why it matters. The thing a title company will ask for. Until they exist, nobody can sign a deed — no matter what the will says.Read more →See also: Personal Representative See also: Probate
LienContracts · Money & costs: A legal claim against a property, usually securing a debt.Why it matters. Mortgages are voluntary liens. Unpaid contractors, taxes, and judgments create involuntary ones. They attach to the property, not just the person — which is why they surface in the title search.See also: Clear Title
List PriceSelling · Market: The price a seller advertises. An asking price, not a valuation.Why it matters. It reflects what the seller hopes for. Sale price reflects what a buyer agreed to. In this market those two numbers diverge in both directions.See also: Comparable Sales (Comps)See also: Sale Price
Listing AgreementSelling · Contracts: The written contract between a seller and their agent, setting the terms of the engagement.Why it matters. It contains the compensation terms, the length, and what happens if you want out. Read it before signing — that's where 'standard' claims meet actual language.See also: Buyer Agency Agreement
Loan EstimateBuying · Money & costs: A standardized form your lender must provide within three business days of your application, itemizing your loan's costs.Why it matters. The comparison tool most buyers never use. Because the format is fixed by law, two lenders' estimates line up side by side — which makes shopping genuinely possible.Read more →
Loan-to-Value (LTV)Buying · Money & costs: Your loan amount as a percentage of the home's value.Why it matters. The number driving whether you owe PMI and what rate you're offered. Put 10% down and your LTV is 90%.See also: Private Mortgage Insurance (PMI)See also: Equity
Millage RateMichiganTaxes: The rate used to calculate property tax, expressed in mills — one mill is $1 per $1,000 of taxable value.Why it matters. It varies meaningfully between jurisdictions in the same metro. Two similar homes a mile apart can carry noticeably different bills.See also: Taxable Value
MLSMarket · Selling: The Multiple Listing Service — the shared database agents use to list properties and share them.Why it matters. What feeds most listing sites. A home listed here reaches every agent and portal at once, which is why the first days matter so much.
Months of SupplyMarket: How long it would take to sell every listed home at the current pace, with nothing new added.Why it matters. The single clearest read on who has leverage. Five or six months is balanced. Kent County has been running near one — which is why well-priced homes move in days.Read more →
Multiple Offer SituationBuying · Market: More than one buyer competing for the same property at the same time.Why it matters. Routine in a one-month-supply market. How a seller handles them — best and final, or negotiating with one — is their choice, and the rules should be stated up front.See also: Escalation Clause See also: Months of Supply
Net ProceedsSelling · Money & costs: What a seller actually receives after payoff, commissions, taxes, and closing costs.Why it matters. The number that matters and the one nobody quotes. Sale price is the headline; this is the paycheck.Read more →See also: Settlement Statement See also: Sale Price
Open HouseSelling: A set window when a listing is open to anyone without an appointment.Why it matters. More useful for meeting buyers early in their search than for selling that specific house — most sales come through scheduled showings.
PendingMarket: A property under contract with contingencies cleared, waiting on closing.Why it matters. Further along than 'under contract' and much less likely to fall apart, though not impossible.See also: Under Contract
Personal PropertyContracts: Movable belongings — furniture, appliances that aren't built in, the patio set.Why it matters. It does not automatically transfer with the house. If you want it, name it in the contract. If you're keeping it, say so before someone assumes otherwise.See also: Real Property See also: Fixture
Personal RepresentativeMichiganInheritance · Contracts: The person the probate court authorizes to act for an estate — sometimes called an executor.Why it matters. Being named in a will isn't enough to sell a house. The authority comes from the court, and until someone holds it, nobody can sign a deed.Read more →
PointsBuying · Money & costs: An upfront fee paid to the lender to reduce your interest rate. One point is 1% of the loan.Why it matters. Worth it only if you keep the loan long enough to recoup the cost. Ask the lender for the break-even month, in writing.
Pre-ApprovalBuying · Money & costs: A lender's conditional commitment to lend a specific amount, based on documents they've actually reviewed.Why it matters. Different from pre-qualification, which is a conversation. In a one-month-supply market, a pre-qualification letter carries close to no weight with sellers.See also: Months of Supply
Pre-QualificationBuying · Money & costs: An informal estimate of what you might borrow, based on what you tell a lender.Why it matters. A conversation, not a commitment. In a competitive market it carries close to no weight with sellers — which is why the distinction from pre-approval matters.See also: Pre-Approval
PrincipalMoney & costs: The amount you actually borrowed, separate from the interest charged on it.Why it matters. The portion of each payment that reduces your debt. Paying extra toward principal shortens the loan more than most people expect.See also: Amortization See also: Equity
Principal Residence Exemption (PRE)MichiganTaxes: A Michigan exemption that removes local school operating tax from your primary home.Why it matters. Worth real money annually, and it must be claimed — file the affidavit with your local assessor. A property you don't occupy doesn't qualify.See also: Taxable Value See also: Millage Rate
Principal, Interest, Taxes, Insurance (PITI)Money & costs · Buying: The four parts of a typical monthly mortgage payment.Why it matters. Quoted payments often mean principal and interest only. Taxes and insurance can add several hundred dollars a month, which is the difference between affordable and not.Read more →
Private Mortgage Insurance (PMI)Buying · Money & costs: Insurance protecting the lender when a buyer puts down less than 20%. Paid by the buyer.Why it matters. It's the real cost of a small down payment — but it isn't permanent. It typically drops off as you build equity, which makes 'wait until you have 20%' worse advice than it sounds.Read more →See also: Down Payment See also: Equity
ProbateMichiganInheritance: The court process that settles a deceased person's estate and authorizes distribution of their property.Why it matters. A Michigan estate has to stay open at least five months. But the house doesn't have to sit idle for those months — with authority in hand it can be prepped, listed, and put under contract meanwhile.Read more →See also: Personal Representative See also: Letters of Authority
Property Transfer AffidavitMichiganTaxes: The form a new Michigan owner files with the local assessor after a transfer.Why it matters. Due within 45 days. Failing to file can bring back taxes, interest, and penalties — an avoidable expense that catches people who assume the title company handled everything.Read more →See also: Uncapping
ProrationMichiganTaxes · Money & costs: Splitting a shared annual cost — usually property taxes — between buyer and seller based on the closing date.Why it matters. Which side owes what depends entirely on when you close and how your local jurisdiction bills. It's a real line on the settlement statement, not a rounding item.
Quit Claim DeedContracts: A deed transferring whatever interest the signer has — with no guarantee they have any.Why it matters. Common between family members, in divorces, and for correcting errors. Almost never appropriate for buying a house from a stranger.See also: Warranty Deed See also: Deed
Rate LockBuying · Money & costs: A lender's commitment to hold a quoted interest rate for a set window.Why it matters. Usually 30 to 60 days. If your closing slips past it, extending costs money — which is one reason closing dates aren't arbitrary.
Real PropertyContracts: Land, plus anything permanently attached to it — the house, the garage, the fence, the trees.Why it matters. Distinct from personal property, which is everything you can carry out. The line between them decides what actually conveys with the sale, and it's why the refrigerator question comes up on every deal.See also: Personal Property See also: Fixture
Sale PriceSelling · Market: What a property actually sold for.Why it matters. The only price with evidence behind it. It's also not what the seller nets — costs, payoff, and concessions all come out of it.See also: List Price See also: Net Proceeds
Seller ConcessionsSelling · Money & costs: Money the seller agrees to put toward the buyer's closing costs, deducted at settlement.Why it matters. A full-price offer asking $8,000 in concessions is a full-price-minus-$8,000 offer. The headline number and the net number are different questions.Read more →
Seller's MarketMarket: More buyers than available homes. Prices firm, days on market short, leverage with the seller.Why it matters. Kent County has been running here for years. It shapes everything about how a buyer should prepare.See also: Months of Supply See also: Buyer's Market
Settlement StatementBuying · Selling · Money & costs: The itemized accounting of every dollar moving at closing, for both sides.Why it matters. The document most people see for the first time at the table, when every line on it is already decided. A net sheet is this document, built in advance.Read more →See also: Closing Costs
ShowingSelling · Buying: A scheduled visit for a prospective buyer to tour a home.Why it matters. In a fast market these cluster into the first days. Saying yes to as many as you reasonably can is the plan working, not an imposition.Read more →
StagingSelling: Preparing and furnishing a home to help buyers picture living there.Why it matters. Not decorating. In NAR's 2025 report, 83% of buyers' agents said it made it easier for buyers to envision a property as their future home — which is the entire game in week one.Read more →
State Equalized Value (SEV)MichiganTaxes: Half of what the assessor believes your home would sell for. Set in bulk for whole neighborhoods at once.Why it matters. Folk wisdom says double your SEV to get market value. Not quite — assessors use mass formulas and sales studies that lag the market, sometimes by more than a year. It's a clue, not a price.Read more →
Stepped-Up BasisInheritance · Taxes: When you inherit property, its cost basis resets to fair market value on the date of death.Why it matters. Decades of appreciation are never taxed to anyone. It's the rare tax rule that runs in a family's favor — but only if you can prove the date-of-death value, so get it in writing early.Read more →
SurveyBuying · Contracts: A professional measurement of a property's boundaries, and often the location of structures on it.Why it matters. The way to find out that the fence is three feet onto the neighbor's land before it becomes your problem rather than after.
Taxable ValueMichiganTaxes: The number your Michigan property tax bill is actually calculated from — not the same as market value or assessed value.Why it matters. While one owner holds a property, this can only rise by inflation or 5% a year, whichever is lower. That cap is why a long-time owner's tax bill can look nothing like yours will.Read more →See also: Uncapping See also: State Equalized Value (SEV)
TitleContracts: Legal ownership of a property — the bundle of rights, not a piece of paper.Why it matters. You can hold title without holding a deed in your hand. Title problems are why title insurance exists.See also: Deed See also: Title Insurance See also: Clear Title
Title InsuranceMichiganContracts · Money & costs: Insurance against defects in the ownership history — liens, errors, or claims that surface after you buy.Why it matters. Two policies exist: the owner's policy (customarily seller-paid in Michigan) and the lender's policy (buyer-paid). They protect different people.
Transfer TaxMichiganTaxes · Money & costs · Selling: A tax on the sale itself: $3.75 per $500 to the state and $0.55 per $500 to the county.Why it matters. Together about 0.86% of the sale price — roughly $2,580 on a $300,000 home — and customarily the seller's bill in Michigan. Set by statute, so nobody negotiates it.Read more →
UncappingMichiganTaxes · Buying: When a Michigan property sells, the cap on its taxable value comes off the following year and resets to current market value.Why it matters. The single most expensive surprise for buyers here. The tax figure on the listing is the seller's bill, not yours. Ask the assessor what the uncapped number will be before you write an offer.Read more →See also: Taxable Value
Under ContractBuying · Selling · Contracts: A property with an accepted offer, where contingencies haven't yet been satisfied.Why it matters. Not sold. Deals fall through during this window — most often over financing, inspection, or appraisal — which is why some listings come back to market.See also: Contingency See also: Pending
Warranty DeedContracts: A deed where the seller guarantees they own the property free of undisclosed claims.Why it matters. The strongest common form, and the standard for an arm's-length sale. It's a promise with legal teeth behind it.See also: Deed See also: Quit Claim Deed