Real Estate Terminology Sheet With Meanings
A backup offer is real estate terminology both prospective buyers and sellers should understand. In a hot real estate market, it is not uncommon for you to find the perfect home right as another buyer is signing a contract with the seller. While this can be frustrating, not all hope is lost. Real estate deals fall through all the time for a myriad of reasons. You may not control whether the deal goes through, but you can make a backup offer that will put you first in line should the seller need another buyer. A backup offer may not guarantee that you get the home you want, but it is a helpful tool to keep you in the running in the unpredictable world of real estate transactions. See how a backup offer works in real estate sales. Understanding a backup offer well could be the key to getting the home you want
A buyer’s agent works for a home buyer while purchasing real estate. A buyer’s agent is a fiduciary whose purpose is to look out for a buyer’s best interests throughout a transaction. Buyer’s agency is the exact opposite of a seller’s agent, whose job is to represent the seller. See some of the tasks a real estate agent does for a buyer. The least essential function of a buyer’s agent is showing property.
The closing is the final consummation of a real estate deal. Buyers and sellers will sign the final closing paperwork transferring the title from seller to buyer. The seller will present a new deed which will be recorded at the local registry of deeds.The typical time from an offer to a closing average is around 30-60 days.
Whether you are buying or selling a house, you’re will likely want to know the costs involved. Many folks ask what is a closing cost. Depending on whether you’re a potential buyer or seller, it will be crucial to understand the amount of money it will cost you. Closing costs are the fees you pay as part of a purchase agreement for residential property. Sellers have closing costs as well related to the transfer of property
Comparative Market Analysis
A comparative market analysis is similar to a home appraisal, but a real estate agent performs it.An agent will use real estate comparables in order to determine the market value for a particular property. The acronym for this real estate term is a CMA. The CMA is one of the real estate terms agents will often learn while studying for their real estate exam.
Condominium or Condo
When it comes to real estate jargon, the definition of a condo is genuinely different from that of single-family homes. With a condo, you own individual units but share ownership of the common grounds and areas within a community. Common areas typically include amenities such as swimming pools, tennis courts, or a gym. Condos are usually run by an HOA. They are governed by a legal document that covers ownership rights, rules, and regulations of the community. Property management companies oversee some condo projects.
Contingent and Pending
Whether you are a buyer or a seller, knowing the most common real estate listing statuses is critical. A real estate agent will change the status in the multiple listing service when the buyer and seller have executed a contract. The two statues that are confusing are contingent and pending. See what does contingent mean and what does pending mean of a complete understanding. These listing statuses are confusing real estate terminology for those who don’t practice real estate every day. See pending vs. contingent to see the difference. When a home is marked in MLS as pending, the days on market are frozen with contingent they may not be.
Your credit score is one of the most significant factors lenders use when lending money. Having a good credit score can help borrowers get better mortgage interest rates and terms. Having a bad credit score will do just the opposite. The FICO score system will determine your credit score. The three major credit bureaus are Experian, Equifax, and Transunion. There is a minimum credit score to buy a house, so it becomes essential to improve your score. Buying a house with bad credit can be very challenging. Your credit score will impact many facets of your life, both short and long-term. Your scores will undoubtedly influence your mortgage agreement with the lender you choose. Companies like Credit Karma can help with improving your credit before buying a home.
It is always important to clarify with a real estate agent who they represent – because it may not be you or just you. In the case of dual agency, an agent will take over the buyer’s and seller’s agent’s agent, serving both the buyer and seller in a real estate transaction. Some states have made dual agency illegal, while others have strict rules that must be adhered to during dual agency. Whatever your state’s laws concerning dual agency, the fact is that it is an arrangement that does not serve your best interests. In most transactions, the buyer wants to buy for as little money as possible, while the seller wants to sell for as much money as possible. Those two goals are at odds with one another, which means that a dual agent cannot effectively serve both parties.
Earnest Money Deposit
Earnest money is one of the most critical real estate terms every home buyer and seller should understand—the earnest money an agent collects can best be described as the glue behind the transaction. Like it sounds, earnest money proves to a seller that a buyer is “earnest” or serious about buying their home. The amount of earnest money collected can depend on the area of the country in which you are located. As a general rule, you can expect to pay anywhere from one percent to five percent of the purchase price. The earnest money is held in an escrow account until closing. Earnest money is typically controlled by a real estate broker or escrow company. An escrow agent is assigned and responsible to account for these funds until closing. Buyers can lose their earnest money deposit if they do not follow the contract. Potential buyers should understand that earnest money is not the same as a buyer’s down payment. With so much money at stake, it is one of the most important real estate terms to understand.
An easement is the right to use another’s property without taking possession. A common type of easement in real estate is for utilities such as gas or electricity. The companies providing such services have easements or an exclusive right to enter a property to perform work on such utilities if necessary. Easements are established by performing a property survey. It is not uncommon for easements to traverse the owner’s lot boundaries. The easement becomes a written agreement recorded at the registry of deeds. An easement is considered a legal encroachment on a property.
An escalation clause is real estate jargon a buyer can put in an offer that states that the buyer will outbid other offers on a home up to a specific price point. For example, a buyer may initially offer $400,000 but state in an escalation clause that they will outbid other offers by $5,000, up to a ceiling of $425,000. That means that the buyer will most likely get the home as long as no one offers higher than the ceiling price. Unless, of course, the buyer has additional unacceptable terms. Escalation clauses are more common in seller’s markets. Escalators are designed to help a buyer win a bidding war, which has become quite common in hot real estate markets. While an escalation clause can be helpful for the buyer, some sellers may find the addition of such a clause confusing. The seller may wonder why the buyer did not offer more if they were willing to pay the home’s ceiling amount. With an escalation clause, it becomes essential that the listing agent understand them – many do not. See how does an escalation clause work for a complete explanation. An escalation clause can work well for both a buyer and a seller.
An FHA mortgage is one of the most popular types of loans for first-time home buyers. The loan’s popularity stems from the fact it has a low down payment requirement of 3.5%. It is a government loan that the Federal Housing Administration underwrites. If you are buying a fixer-upper, an FHA 203k loan allows you to roll any home improvements into one final mortgage.
A house inspection is a normal part of the real estate industry. A property owner can expect a potential buyer to perform due diligence when purchasing a home. Part of the due diligence process in real estate will be hiring a professional home inspector to thoroughly investigate the property’s condition. The property inspection typically takes place a short time after a real estate contract has been executed.
An iBuyer or instant buyer is new real estate terminology you probably have never heard about. The real estate definition of an iBuyer is a real estate investor who uses technology to formulate an offer on a property. There are advantages and disadvantages of engaging with an iBuyer worth reading.
Personal Property vs. Real Property
Personal property and real property are two real estate terms that you should grasp. Real property is considered “real estate” or part of the property. It is anything that is physically attached, such as lights or the heating system. On the other hand, personal property is items that do not transfer as part of the property. Examples of personal property include furniture and home decor. See what is a fixture in real estate to determine what should stay in a home sale. Real property is one of the real estate definitions that escape many agents. Unfortunately, the lack of understanding can cause problems.
Pre-Qualification Vs. Pre-Approval
Sellers need to know the difference between pre-qualification and pre-approval letters from a lender. A pre-qualification letter is relatively easy to get and simply states the estimated borrowing ability of a buyer. A pre-approval letter is more involved, requiring most of the documents and verification necessary to get a mortgage loan. When you are selling, you want a pre-approval letter to prove that a buyer is really in a position to purchase your home. A pre-qualification letter is most useful for buyers who want to know what price range they can shop in. It is not adequate for a seller to consider offers from buyers. Do not settle for anything less than a pre-approval letter if you are selling. With a pre-approval, you’ll mention that they have run the borrower’s credit and verified their income and employment.
Private Mortgage Insurance
Private mortgage insurance, also referred to as PMI, is insurance that a lender will force you to take out as a buyer if you put down less than 20% on your home. PMI is there to protect the lender, who considers you a more significant risk based on your lack of down payment. Unfortunately, private mortgage insurance can boost your monthly mortgage payment noticeably, so most homeowners are eager to get rid of it. The most straightforward way to eliminate PMI is to reach 80% of your mortgage. You can also try creative options like refinancing, appraisal, and remodeling. Many home buyers will go out of their way to avoid paying private mortgage insurance, often seeking other means of getting a loan that doesn’t require putting down twenty percent. Private mortgage insurance is a good thing. Without it, many buyers would not get into a home.
Real Estate Appraisal
When buying or selling a house, there is likely to be a real estate appraisal when getting a home loan through a mortgage lender. Lenders will want to know the property’s fair market value they are granting a mortgage. The lender will hire a real estate appraiser who is considered an unbiased third party. The appraiser will look over public records of other similar properties sold to determine the current appraised value. Appraisers will also analyze the current housing market conditions to determine whether home values are moving up or down.
You might be thinking, how could anyone not know what a REALTOR® is? The fact of the matter is they don’t. Consumers and even real estate agents interchange the words “Realtor,” “Real Estate agent,” and broker all the time. These are three different real estate terms. They are not the same. In this insightful resource, you can see a detailed explanation of how a Realtor is different from a real estate agent and a broker. A Realtor is a member of The National Association of Realtors. One of the key differences between a real estate agent, broker, and REALTOR® is that REALTOR® pledge to follow the real estate code of ethics. A real estate agent is not required to follow the code.
When it comes to real estate terminology, a special assessment is often associated with purchasing a condominium or a townhouse, where a homeowners association exists. A special assessment is a fee charged for an unexpected expense. For example, if the roofs on the condo or townhouses need to be replaced and there is not enough money in the “reserve fund,” a special assessment would be collected from the owners. Special assessments can be expensive, so they should be researched before buying a condo or townhouse. Townhouses or Townhomes Many buyers wonder what exactly is a townhouse. Many people confuse the difference between a condo and a townhouse. They are not the same thing! A townhouse or townhome is a property over multiple floors that shares a wall with neighbors on one or both sides. With a townhouse, you will typically own the land that the townhouse resides on. It is also more common that you will be responsible for maintaining the property’s exterior. For example, you could be required to cut your own grass and mow your own lawn
Another real estate term that very few people are familiar with is title insurance. Title insurance is real estate terminology every buyer should know. Real estate title insurance is a type of insurance that covers financial loss from defects in title to real property and the invalidity of mortgage liens. If a lawsuit attacks your home’s title due to defects in the title, the insurance protects you financially. There are a few major title insurance companies to choose from. The lender you’re working with will often recommend a title insurance company. Lenders will offer the option of purchasing title insurance when you take out your mortgage. It is a one-time fee for the insurance, which can be a substantial extra cost when added to all the other costs of buying your home. While it is a significant one-time fee to a buyer, it’s worth it! Learn more about title insurance in this comprehensive article. See the pros and cons of title insurance.
A title search is performed by a title company or real estate attorney hired by the mortgage lender. The purpose of the title search is to ensure there are no encumbrances against the property and to determine legal ownership. The process involves researching the chain of title, among other things. It is a legal process that occurs as a regular part of doing real estate business in the United States. A title company will prove to all the parties involved in the transaction that there is a clear title.