Top 15 Real Estate Terms You Need To Know About
If you’re looking to buy a home, you need to know these real estate terms. Here are the top 15 you’ll hear about in every conversation with an agent or seller:
- “Asking Price”
This is what your offer will be for a property when it comes time to negotiate the price of the house. It’s important that this number stays below asking by at least 10% to avoid losing out on money and time.
- “Appraisal”
The appraisal is a third party analysis of the value of a property. An appraiser uses their knowledge and experience to determine the current market value of a property. They do this by researching recent sales in the area and using comparable properties as a guide. The appraiser then reports back to the buyer so they can make an informed decision regarding whether or not to purchase the property.
- “Cash Offer”
A cash offer is simply an amount of money you are willing to pay for a property without requiring any financing from a bank or other lender. A cash offer is typically used when the seller wants to move quickly, or if they have multiple offers but don’t want to go through the process of negotiating.
- “Closing Date”
This refers to the date that you need to bring all the documents needed for a loan approval and close on the sale of the property. Typically, the closer you get to the closing date, the more likely you are to find something wrong with the paperwork and be forced to delay the transaction.
- “Contingency Clause”
This clause allows the seller to remove themselves from a contract if they decide they would rather sell to someone else after making an offer on the property. This is typically done to ensure that both parties walk away from the deal feeling like they got the best possible outcome.
- “Days On Market (DOM)”
This refers to how long a property has been listed for sale before being purchased. Longer DOM means that the listing agent spent more time advertising and showing the property to potential buyers. In general, sellers prefer short DOMs because it makes the property look like it was actively marketed.
- “Documents Needed For Loan Approval”
These are the legal documents that must be signed by the buyer and seller to finalize a mortgage loan. If you’re buying a house, this includes your income verification form, proof of funds, appraisal, and title search. If you’re selling, it will include the sales contract, disclosure statement, deed, and inspection report.
- “Escrow”
An escrow is where the bank takes possession of the documents needed for loan approval and holds them until the transaction is complete. Escrows are necessary to protect both sides of the transaction and keep things moving forward smoothly. Without an escrow, one party could change their mind and the other would be left holding the bag.
- “For Sale By Owner”
This is a term that is often used to describe homes that were built in a development and sold directly to a private owner instead of going through an agency. These properties tend to be larger than those sold through an agent, and they’re usually priced higher because they don’t have the same selection of properties available.
- “Fees & Expenses”
This is the total amount of money that will be paid by the buyer to the seller to cover closing costs and other expenses incurred during the transaction. It’s typically calculated based on the square footage of the property, the type of loan you take out, and the length of the loan.
- “Inspection Report”
When you buy a house, the seller may ask for an inspection report to be performed on the property. This is done by a licensed professional who examines the property for structural defects, environmental concerns, and issues with the HVAC system.
- “Lender’s Pre-Qualification Letter”
A pre-qualification letter is a document that shows the lender that you are qualified to take out a certain amount of money for a specific loan. Lenders use this information to determine if you’re a good fit for a particular loan program and can give you a better rate.
- “Listing Agent”
A listing agent represents the seller and negotiates the price and terms of the sale with the buyer. The listing agent also helps the seller prepare the property for sale, such as staging the furniture and appliances, cleaning the interior, and getting rid of clutter.
- “Mortgage Broker”
A mortgage broker is a company that acts as an intermediary between lenders and borrowers. Mortgage brokers typically receive a commission from the lender for each loan that they help you finance.
- “Negative Equity”
This is the difference between the value of a home and the amount that you owe on it. It’s calculated by subtracting the amount that you still owe on the property from the property’s current value. Negative equity can cause problems for homeowners because it prevents them from selling the property and moving on.
Final Words
Buying a house is one of the biggest purchases that most people make. You want to do everything you can to ensure that the transaction goes smoothly, so that you can get into your new place and start living the life that you’ve always dreamed of. To help you navigate the process, we created this guide. We hope these real estate terms will be helpful as you work toward your goal of owning a home.
