Entering into a real estate transaction can sometimes be a scary thing! Many times buyers or sellers are hearing all kinds of terms they don’t understand from Lenders, real estate agents, inspectors, appraisers and whoever else may be involved in the transaction.
I’m going to make a quick post about some of the most frequently used “must know” real estate terms. Feel free to post comments about any other terms you may have questions on.
Agent – A real estate agent is a person who works for a seller, buyer, or both during a real estate transaction.
Appraisal – Property valuation or land valuation is the process of developing an opinion of value, for real property (usually market value).
Appraiser – provides an objective and unbiased estimate or appraisal of the value of a property.
Assessment – The value assigned to your home by a government tax assessor, which is used to calculate property taxes.
Closing – (also referred to as completion or settlement) is the final step in executing a real estate transaction. On the closing date, the ownership of the property is transferred to the buyer.
Closing Costs – the costs associated with completing a real estate transaction such as commissions, inspection fees, title work fees, taxes, and more.
Comps– short for “comparables”, are homes that are located in the same neighborhood and are similar in size, age, condition and features as the property you are trying to buy or sell.
Contingencies – refers to a condition of the Agreement of Sale that needs to occur (structurally or financially) in order for the transaction to keep moving forward.
Counter Offer – when a seller sends back a new or adjusted offer that differs from the original offer sent by the buyer.
Dual agency– when a real estate agent works with the buyer and the seller on the same transaction simultaneously.
Earnest money – Also known as an EMD – is a deposit made to a seller that represents a buyer’s good faith to buy a home. The money gives the buyer extra time to get financing and conduct the title search, property appraisal, and inspections before closing.
Escrow – Is when a neutral third party holds on to funds during a transaction. In real estate, it’s used as a way to protect both the buyer and seller during the home purchasing process.
Inspection – A thorough inspection of a home by a licensed inspector to discover any issues or repairs that need to be made before buying the home.
Listing – An agreement that represents the right of a real estate agent or Broker to handle the sale of real property and to receive a fee or commission for services.
Mortgage – the charging of real (or personal) property by a debtor to a creditor as security for a debt (especially one incurred by the purchase of the property), on the condition that it shall be returned on payment of the debt within a certain period.
Multiple Listing Service – The MLS is a local or regional service that compiles available real estate for sale by member brokers along with detailed information brokers and agents can access online.
Offer —Also called a real estate purchase contract or a residential purchase agreement—is a legal agreement that identifies the seller(s) and the buyer(s), but it stipulates much more than the final price.
Pre-Approval letter – Provides documentation of exactly how much mortgage you have been approved to borrow. And this documented evidence shows both Realtors and sellers that you are serious in your pursuit of a property. A pre-approval letter can make a big difference for homebuyers.
Principal – The amount borrowed for a mortgage loan. Monthly mortgage payments include both the repayment of the principal and interest owed.
Private Mortgage Insurance (PMI) – a monthly payment added to the mortgage payment when a buyer has less than 20% as a down payment on the property. It protects the lender (insurance) in case the buyer defaults on the loan.
Real Estate Broker – A real estate agent who is licensed by the state to represent a buyer or seller in a real estate transaction. A real estate broker gets paid a commission. Most real estate brokers also have agents working for them. Licensing for a broker and an agent are different in case you are confused.
Real Estate Owned (REO) Properties – If a foreclosed property is not sold off during the foreclosure auction, the bank will take ownership of the real estate. This bank owned property is known as a real estate owned property.
Real Estate Purchase or Sales Agreement – Is a binding contract between a buyer and seller that outlines the details of a home sale transaction. The buyer will propose the conditions of the contract, including their offer price, which the seller will then either agree to, reject or negotiate.
Title – A legal document listing the history of ownership of the home. Buyers get a preliminary title report from an escrow agent or attorney within a week after they reach mutual acceptance on an offer.
Title Insurance – Protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances or the defects in the title to the property.
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