Reference

Real estate glossary.

Plain-language definitions for the buying, selling, and investing terms you'll run into across Seattle & Eastside, WA.

1031 exchange: A swap of one investment property for another that lets an investor defer capital gains tax, named for the IRS code section that allows it. Comes with strict timelines and rules on what qualifies.
Appraisal: An independent, licensed professional's estimate of a property's market value, usually required by a lender before approving a mortgage.
ADU / DADU: Accessory Dwelling Unit -- a secondary living space on a single-family lot, either attached to the main house or detached (a DADU). Increasingly common in Seattle for extra income or multigenerational living.
BRRRR: Buy, Rehab, Rent, Refinance, Repeat -- an investment strategy where an investor renovates a property, rents it out, then refinances based on the improved value to pull cash out for the next purchase.
Cap rate: Capitalization rate -- a property's annual net operating income divided by its price or value, expressed as a percentage. A quick way to compare income potential across properties, though it ignores financing.
Cash-on-cash return: Annual pre-tax cash flow divided by the actual cash invested (down payment, closing costs, etc.). Unlike cap rate, it accounts for financing -- often the more relevant number for a leveraged buyer.
Closing costs: Fees paid at closing beyond the purchase price -- title insurance, escrow fees, recording fees, lender fees, and more. Typically 2-5% of the purchase price, split between buyer and seller by local custom.
CMA (Comparative Market Analysis): An agent's estimate of a property's value based on recently sold, similar nearby properties -- the practical, non-appraisal way most listing prices get set.
Contingency: A condition in a purchase offer that must be satisfied for the sale to proceed -- common ones cover financing, inspection, and appraisal. A contingency lets a buyer walk away (and keep earnest money) if it isn't met.
DSCR (Debt-Service-Coverage-Ratio): A loan-underwriting measure that qualifies a property on its own rental income rather than the borrower's personal income -- in-place or market rent divided by the mortgage payment. Common in non-QM investor lending.
Earnest money: A deposit a buyer puts down when making an offer, showing good faith. It's credited toward the purchase at closing, or forfeited if the buyer backs out outside an active contingency.
Escrow: A neutral third party that holds funds and documents during a transaction, releasing them only once every condition of the sale is met by both sides.
HELOC: Home Equity Line of Credit -- a revolving credit line secured against a property's equity, often used by investors to fund a down payment on the next purchase.
House hacking: Living in one unit of a multi-unit property (or renting out spare rooms) so tenant income offsets some or all of the owner's own housing cost -- a common low-capital entry into real estate investing.
LLPA (Loan-Level Price Adjustment): A fee (or rate premium) added to a conventional mortgage based on risk factors like credit score, down payment size, and occupancy type -- the mechanism behind why investment-property rates run higher than owner-occupied rates.
MLS (Multiple Listing Service): The shared database real estate agents use to list and search properties for sale -- the primary channel most buyers' searches ultimately draw from.
Off-market / pocket listing: A property for sale that hasn't been listed on the MLS -- shared directly through an agent's network instead. Can mean less competition, but also a smaller pool of interested buyers for the seller.
Pre-approval vs. pre-qualification: Pre-qualification is a lender's informal, self-reported estimate of what a buyer can borrow. Pre-approval is a firmer commitment based on verified income, credit, and assets -- what a competitive offer actually needs.
Rent-by-the-room: Leasing a single-family home to multiple unrelated tenants under separate agreements for their own bedroom, rather than to one household on one lease -- can raise gross rent, at the cost of more turnover and management.
Title insurance: A one-time-premium policy protecting a buyer (and their lender) against undiscovered defects in a property's ownership history -- liens, forged signatures, or missed heirs, for example.
Value-add: An investment strategy centered on actively increasing a property's income or value -- renovation, better management, or fixing an inefficient unit mix -- rather than waiting on the market alone.