Whether you’re planning on buying or selling real estate, you’re going to come across all kinds of real estate terminology that you may not be familiar with. Knowing what your REALTOR® is talking about when they use common real estate lingo is going to help make it easier to communicate, thereby making the home buying or home selling process much easier. Here are a number of real estate terms that you should familiarize yourself with:
- Appraisal — The estimated value of the property as determined by a qualified appraiser. Lenders require an appraisal of a property before providing the mortgage loan to the buyer.
- Appreciation — The amount that a property has increased in value over a specific time.
- Closing — The closing is the scheduled day on which the sale of the property is officially finalized. The buyer signs all the mortgage documents and pays the closing costs and the seller completes the transaction with the buyer.
- Closing Costs — The closing costs refer to all of the costs associated with the final sale of a property, all of which must be made by the closing date. These costs typically include brokerage fees, origination fees, lawyer fees, title insurance fees, survey fees, and taxes.
- Contingency — A condition that must be met before the contract between the buyer and the seller becomes legally binding. A common contingency is the option period. If during the option period, the home inspection reveals major problems, then the contingency allows the buyer to walk away from the contract without losing their earnest money.
- Depreciation — The amount that a property has declined in value over a specific time.
- Down Payment — The down payment is the amount of money you pay toward a property out of pocket before your lender provides you with the mortgage loan to cover the rest of the property’s price. The down payment varies depending on the type of mortgage you take out as well as a number of other factors. It can be anywhere from 3.5 percent of the total cost to 20 percent.
- Earnest Money Deposit — The earnest money deposit is the money you provide along with your offer on a house as a show of good faith. The earnest money deposit usually accounts for one to two percent of the property’s purchase price. An escrow agent holds the earnest money deposit until the sale goes through. If the sale goes through, the earnest money deposit goes toward the down payment. If the seller rejects the offer, the money goes back to the buyer.
- Escrow — The escrow is a deposit of funds or documents, such as the earnest money deposit, that are held by a neutral third party (often an escrow agent) until the sale goes through.
- Listings — REALTORS® will often refer to homes that are for sale as listings. You can find listings online. These listings include basic information about the home for sale, such as the price, number of bedrooms and square footage.
- Mortgage Pre-Approval Letter — Buyers can get approved for a home loan (known as a mortgage) before they find a property they want to invest in. This is known as being pre-approved for a mortgage. This lets buyers know how much they can borrow. They can use the mortgage pre-approval letter to show sellers that they have the financing in place to purchase the home.
- Multiple Listing Service — The Multiple Listing Service (MLS) is a large database that real estate agents have access to that provides detailed information about most of the properties that are currently on the market.
- REALTOR® — Don’t make the mistake of thinking a REALTOR® is the same thing as a real estate agent. Not all real estate agents are REALTOS®. REALTORS® are members of the National Association of Realtors (NAR) and abide by a strict code of ethics.
- Title Insurance — This insurance helps to protect the lender and the buyer against any losses that occur due to a dispute over the property’s ownership.
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