Real Estate Glossary

Balance sheet:

A financial statement of an entity such as a corporation or limited liability company that shows assets, liabilities, and net worth as of a specific date. This is generally required to underwrite alternate documentation borrowers who are self-employed.

Balloon mortgage:

A mortgage with a fixed payoff date that has level monthly payments of principal and interest that do not fully amortize the loan as of the payoff date. The balance is due in a lump sum payment at a specified date, usually at the end of the term.

Balloon payment:

The final lump sum payment plus any accrued interest that is made at the maturity date of a balloon mortgage.


A person, firm, or corporation (debtor) that, through a court proceeding either through Chapter 7, 11 or 13, is relieved from the payment of some or all debts, usually after the surrender of all assets to a court-appointed trustee or after the reorganization of the debtor's assets and liabilities. Usually, at least two (2) years must elapse from the discharge of the bankruptcy before lenders will consider making a loan to someone who has declared bankruptcy.


A legal proceeding in a federal court under Chapter 7, 11, 13 in which a debtor who owes more than his or her assets can seek and possibly receive debt relief by transferring his or her assets to a trustee or agreeing to reorganization of assets and liabilities. Usually, at least two (2) years must elapse from the discharge of an individual bankruptcy before lenders will consider making a loan to someone who had declared bankruptcy.


Basis, also referred to as cost basis, is used to compute the amount of any taxable gain or loss when selling real property. Cost basis includes the original cost of the real property plus closing costs, selling costs, and the cost of any subsequent improvements made.


In a deed of trust arrangement, the beneficiary refers to the lender in the underlying loan transaction. In a foreclosure under a deed of trust or other instrument, the lender is the beneficiary of any proceeds derived from the foreclosure sale.


An improvement that increases property value as distinguished from repairs or replacements that simply maintain value. A betterment would be a pool or an addition to a single-family residence (SFR).

Bill of sale:

A written document that transfers title to personal property. In a real estate closing, a bill of sale would transfer appliances and items not affixed to the property itself.


A preliminary agreement or letter of intent to purchase, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate from a seller.

Bi-weekly payment mortgage:

A type of mortgage that requires payments to amortize the underlying debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually directly drafted from the borrower's bank account via ACH. The result for the borrower is a substantial savings in interest because principal is paid down faster because of the shorter amortization schedule.

Blanket insurance policy:

A single policy usually covering liability or hazard that typically covers more than one piece of property (or more than one person). Some blanket liability policies are also called "Umbrella" policies.

Bona fide:

In good faith, without knowledge of fraud. A bona fide purchaser is one involved in an arms length transaction.


A bond is another legal term for a note or the underlying loan obligation that is secured by either a mortgage or deed of trust. The note or bond evidences the amount of the initial loan amount, the interest rate, amortization schedule, and other important repayment terms.


A violation of a legal obligation usually in the form of a failure to abide by a contract provision.

Bridge loan:

A temporary loan that provides funds for a homebuyer to make a down payment and pay closing costs on a new home before the existing home is sold. Also known as gap financing.


A person who, for a commission or a fee, arranges to bring parties together and assists in negotiating contracts between them. A real estate broker or salesperson is usually licensed by a particular state and must represent one party or another (either buyer or seller) but not both. See mortgage broker.


A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines for managing future investments and expenses. Budget can also relate to costs associated with an individual real estate or construction project in which certain expenses are allocated.

Budget category:

A line item category of income or expense data that is included in a budget to delineate a particular matter. Budget categories can be defined and added to some or all of the budgets created. "Rent" or "Taxes" are examples of expense categories. "Salary" is a typical income category for an individual.

Building code:

Local regulations and ordinances that control design, construction, and materials used in construction. Building codes are based on safety and health standards. Such codes are often based on national and statewide codes or requirements.

Buydown account:

An escrow or other account in which funds are held so that they can be applied usually as part of the principal mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect.

Buydown mortgage:

A buydown mortgage is one in which an initial lump sum payment is made by any party to reduce a borrower's monthly payments usually by "buying down" principal during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.

Buyer's attorney's fees:

Fees and costs paid by a homebuyer for legal services and/or advice in conjunction with purchasing real estate and completing a real estate closing.

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