Whether you’re buying or selling a home, you’re bound to run into confusing terminology along the way. If you’ve never bought or sold a house before, some of the terms used by real estate professionals could be new to you. From appraisals, offers, and MLS to closing and earnest money, all the different names can get confusing.
To help you out, we’ve put together a list of the basic real estate terms so you can better understand any unfamiliar jargon.
Check out our Real Estate Terms printable of these definitions for you to use:
Note: The following are not legal definitions; use as a general guideline only. If you specific questions about mortgages or real estate, contact a real estate or mortgage lending professional.
Real estate terms you need to know before you buy or sell your house
Amenities: Useful features of a property, such as a garage, security system or swimming pool.
Appraisal: The estimated market value of a property. A professional appraiser examines a property and does other research (typically on comparable properties) to determine the estimated market value. The appraiser provides a written report to the lender.
Assessment: The property value determined by the local government to figure annual property taxes.
Buyer’s Agent (or buyer’s broker): A real estate agent (or broker) who represents the buyer in a real estate transaction.
By-laws: The official, written rules, and regulations of a neighborhood association or housing cooperative.
Closing: When the final, formal documents in a real estate transaction are signed and transferred to the new owner. All payments and fees are made to the appropriate parties.
Commission: In a real estate transaction, the commission is a payment to the real estate broker for marketing and assisting with the sale of a property. The commission amount is a specific percentage of the price of the property. The commission is typically paid by the seller of the property and split between the seller’s agent (or broker) and the buyer’s agent (or broker).
Comps (comparables): Comparing sold properties that have similar locations, sizes, and features to figure the fair market value of a specific property.
CMA (Comparative Market Analysis): An analysis by a real estate professional to determine the fair market value of a property by comparing similar sold properties to the property in question.
Contingency: A specific condition included in a contract for the contract to be binding. In real estate, contingencies can consist of financing, inspections, repairs, etc.
Contract: A legally binding agreement between two parties for the purchase and sale, or exchange, of real estate.
Counter-offer: A new offer made by the buyer or seller in response to a previously rejected offer.
Covenant: A written agreement or promise. In real estate, covenants usually refer to the rules or zoning regulations within a specific area, established by neighborhood associations or local government.
Dual Agent: A real estate agent or broker that is representing both the buyer and the seller for the same real estate transaction. The dual agent is not allowed to share confidential information to either party.
Due Diligence: Researching and investigating a property to confirm the legal, financial and other facts about a property before entering into a contract to purchase the property.
Earnest Money: The amount of money a buyer offers in good faith when making an offer to buy a property. Earnest money is a small percentage of the price of the home and put in escrow until the final closing.
Equity: The difference between the value of a property and the amount owed on the property.
Escrow: An account used to hold money for future costs. Earnest money is held in escrow by the title company until closing (when it’s credited to the buyer). With a mortgage, the lender sets up an escrow account in which the borrower makes deposits monthly (as part of their mortgage payment). It is used to pay for future property taxes and, sometimes, annual insurance fees.
Fair Market Value: The price a property could (or does) sell for on the open market.
Home Inspection: A physical examination of a home’s structure and systems, performed by a professional home inspector. Inspectors provide a written report of their findings and recommendations.
Home Warranty: A policy, or service agreement, that covers unexpected repairs (or replacements) of home appliances and systems for a specified period.
Listing: The information about a property that is shared publicly to market a property for sale (typically on the MLS database).
Listing Contract: An agreement between a real estate broker and the seller of a property where the seller agrees to have the broker (or agent) market and help them sell their property.
MLS (Multiple Listing Service): a database service used by real estate agents for property listings. The MLS is available to member brokers (and their agents) within a region.
Mortgage: The legal documentation of the terms and conditions of a loan used for the purchase of a property.
Offer: A buyer submits a written proposal to a seller, offering to buy their property for a certain price, subject to specific conditions and contingencies. Once both the buyer and the seller sign an offer, it becomes a legally binding purchase agreement.
Pest Inspection: Inspection of a property by a licensed professional to determine if the property has been damaged by or infested with insects, bugs or termites.
Pre-approval: A lender confirms a borrower’s financial situation and determines eligibility for a specific loan amount.
Pre-qualified: A lender estimates how much someone can borrow based on general information provided about the borrower’s overall financial situation.
Principal: The amount of money borrowed for the mortgage loan. The principal amount goes down with each payment.
Real Estate Agent (or salesperson): a licensed professional who represents buyers and sellers in real estate transactions. Agents work under the supervision or a licensed real estate broker.
Realtor: A real estate agent who is a member of the National Association of Realtors (NAR). Realtors are bound by the association’s standards and code of ethics.
Real Estate Broker: A real estate agent with additional training and certifications. Brokers have passed the broker exam and can work independently, as well as hire real estate agents to operate under their supervision.
Real Estate Disclosure: The seller of a property discloses, or shares, knowledge of specific issues, problems, defects or repairs that can affect the value of the property.
Seller’s Agent: A real estate agent (or broker) who represents the seller in a real estate transaction.
Title: The legal document that specifies the official owner of a property.
Title Company: A company that researches legalities associated with the title of a property. They also issue the title insurance for the property.
Buying or selling a home can, at times, feel intimidating and overwhelming. But it doesn’t have to be. At Coluzzi Real Estate, we answer all your questions and simplify the process every step of the way. Please don’t hesitate to contact us at any time!
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