Whether you are buying your first home in Austin or selling a property in the Hill Country, real estate comes with its own language. This glossary covers the terms you will actually encounter during a Texas real estate transaction, with context specific to the Austin market.
Appraisal
A professional estimate of a property’s market value, conducted by a licensed appraiser. Required by most lenders before approving a mortgage. In Austin’s competitive market, appraisal gaps (where the appraised value comes in below the contract price) are common during hot markets.
Closing Costs
Fees and expenses paid at the closing of a real estate transaction, beyond the property’s purchase price. For buyers in Austin, closing costs typically run 2-3% of the purchase price. For sellers, closing costs including agent commissions usually total 6-8%.
Closing Disclosure
A five-page document that provides final details about the mortgage loan, including the loan terms, projected monthly payments, and closing costs. Buyers must receive this at least three business days before closing.
CMA (Comparative Market Analysis)
An analysis of recently sold comparable properties used to determine a home’s market value. Agents prepare CMAs using MLS data, adjusting for differences in size, condition, location, and features.
Contingency
A condition in a purchase contract that must be met before the sale can close. Common contingencies include financing, appraisal, inspection, and sale of the buyer’s current home. In Austin’s competitive market, buyers sometimes waive contingencies to strengthen their offer.
DOM (Days on Market)
The number of days a property has been listed for sale on the MLS. In the Austin market, average DOM varies by area and price point. Lower DOM indicates a seller’s market, higher DOM a buyer’s market.
Earnest Money
A deposit made by the buyer to demonstrate serious intent to purchase. In Texas, earnest money is typically 1% of the purchase price and is held in escrow. It is applied to the purchase price at closing.
Escrow
An arrangement where a neutral third party holds funds or documents until certain conditions are met. In Texas, title companies typically serve as the escrow agent for real estate transactions.
FHA Loan
A mortgage insured by the Federal Housing Administration. FHA loans allow lower down payments (as low as 3.5%) and more flexible credit requirements, making them popular with first-time buyers in Austin.
FIRPTA
Foreign Investment in Real Property Tax Act. Requires buyers to withhold 15% of the purchase price when buying from a foreign seller. Relevant in Austin given the international buyer presence in the tech corridor.
HOA (Homeowners Association)
An organization in a subdivision or community that makes and enforces rules for properties and residents. HOA fees in Austin range from under $100/month for basic communities to over $500/month for luxury developments with amenities.
Home Inspection
A visual examination of a property’s physical structure and systems, from roof to foundation. In Texas, inspections are typically conducted during the option period. Common Austin-area concerns include foundation issues, HVAC efficiency, and roof condition.
Home Warranty
A service contract that covers repair or replacement of major home systems and appliances. In Texas, sellers often provide a one-year home warranty as part of the transaction.
Lien
A legal claim against a property, typically for unpaid debts. Common liens include mortgage liens, tax liens, mechanic’s liens, and HOA liens. Title companies check for liens during the title search process.
Listing Agent
A licensed real estate agent who represents the seller in a transaction. The listing agent helps price the home, markets it, negotiates offers, and guides the seller through closing.
MLS (Multiple Listing Service)
A database used by real estate agents to share property listings. In the Austin area, the primary MLS is ACTRIS (Austin Central Texas Realty Information Services), also known as Unlock MLS.
MUD (Municipal Utility District)
A special taxing district in Texas that provides water, sewage, drainage, and other utility services. MUD taxes are common in newer Austin-area developments and add to the overall tax burden. Buyers should factor MUD taxes into their monthly payment calculations.
Option Period
A negotiated time period (typically 7-10 days in Texas) during which the buyer can terminate the contract for any reason. The buyer pays a non-refundable option fee for this right. This is unique to Texas real estate contracts.
Pre-Approval
A lender’s conditional commitment to lend a specific amount based on the buyer’s financial information. Stronger than pre-qualification, a pre-approval letter is essentially required when making offers in the Austin market.
Property Tax
Annual taxes levied by local governments based on a property’s assessed value. Texas has no state income tax, so property taxes are higher than the national average. Austin-area property tax rates typically range from 1.8% to 2.5% of assessed value.
REALTOR
A licensed real estate agent who is a member of the National Association of Realtors (NAR) and subscribes to its code of ethics. Not all licensed agents are Realtors.
Seller’s Disclosure
A document required by Texas law in which the seller discloses known material defects and conditions of the property. This includes information about structural issues, flooding history, environmental hazards, and HOA requirements.
Short-Term Rental (STR)
A residential property rented for periods of less than 30 days. Austin and many surrounding cities have specific regulations governing STRs, including licensing requirements, occupancy limits, and zoning restrictions.
Subject-To
A financing strategy where the buyer takes over the seller’s existing mortgage payments without formally assuming the loan. The mortgage stays in the seller’s name while the buyer takes title. Used in investment transactions.
Survey
A drawing showing the boundaries and improvements on a property. In Texas, a current survey is typically required at closing. The survey shows easements, encroachments, and setback lines.
Title Insurance
Insurance that protects the buyer and lender against losses from defects in the title, such as undisclosed liens, errors in public records, or forgery. In Texas, title insurance rates are set by the state.
Title Search
An examination of public records to verify the seller’s legal ownership and identify any claims, liens, or encumbrances on the property. Conducted by the title company before closing.
TREC (Texas Real Estate Commission)
The state agency that regulates real estate brokers, salespersons, inspectors, and appraisers in Texas. TREC also creates the standardized contract forms used in Texas real estate transactions.
VA Loan
A mortgage guaranteed by the U.S. Department of Veterans Affairs. VA loans offer no down payment, no PMI, and competitive interest rates. Available to eligible veterans, active-duty service members, and surviving spouses.
