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If you are interested in buying or selling a property, you must understand the terminology involved in the real estate industry. This can be confusing for first-time buyers and sellers, so we have created a list of some essential terms that you need to know.
With this knowledge, you will be able to navigate your way through the real estate process confidently!
Adjustable-Rate Mortgage
A mortgage with an interest rate can change over time.
Appraisal
An estimate of the value of a property, typically conducted by a professional appraiser.
As-Is
A property sold in its current condition, without any repairs or improvements.
Assessed Value
The property’s value is determined by the municipality for tax purposes.
Assessment
A fee charged by local governments to fund public projects and services. This can also refer to determining the value of a property for taxation purposes.
Backup Offer
An offer made on a property already under contract. If the first deal falls through, the backup offer will become active.
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Balloon Mortgage
A mortgage with regular monthly payments that do not fully amortize the loan, resulting in a large balloon payment at the end of the loan term.
Bridge Loan
A short-term loan is used to finance the purchase of a property before longer-term financing can be arranged.
Buyer’s Agent
An agent who represents the buyer’s interests in a real estate transaction.
Blind Offer
An offer was made without the buyer having seen the property.
Buyer’s Agent/ Listing Agent
The agent representing the buyer/seller in a real estate transaction.
Chain of Title
A history of all the previous owners of a property.
Closing
The final step in a real estate transaction is where property ownership is transferred from the seller to the buyer.
Closing Costs
The fees and expenses associated with closing on a property, including loan origination fees, title insurance, and appraisal fees.
Commercial Real Estate
Real estate is used for business purposes, such as office buildings, retail spaces, or warehouses.
Commissions
The fee charged by real estate agents for their services. This is typically a percentage of the sale price of the property.
Covenants, Conditions, & Restrictions
Legally binding rules dictate how a property can be used.
Closing
The final stage of a real estate transaction, during which all paperwork is signed, and the property officially changes hands.
Closing Costs
The various fees and expenses associated with buying or selling a property are typically paid at closing. These can include title insurance, agent commissions, and loan origination fees.
Contingency
A condition that must be met for a real estate transaction to proceed. For example, a buyer may include a contingency that the seller must obtain a certain financing level to close on the property.
Deed
A legal document that transfers ownership of a property from one person to another.
Deed Restrictions
Limitations are placed on the use of a property, as stated in the deed.
Easement
A right to use someone else’s land for a specific purpose, such as access to a shared driveway.
Emblements
Crops or other plants grow on a piece of land when it is sold.
Encroachment
When someone builds on or over another person’s property without permission.
Equity
The portion of a property’s value owned by the homeowner is calculated as the difference between the mortgage balance and the property’s appraised value or sale price.
Earnest Money Deposit
A deposit made by a buyer to show their good faith in a real estate transaction. This money is typically held in escrow and applied towards the property’s purchase price.
Escrow
An account into which funds are deposited during a real estate transaction. This money is typically used to pay things like taxes and insurance, and the balance of the purchase price, if any, remains after the down payment has been made.
Home Inspection
A professional examination of a property to determine its condition is typically conducted before purchase.
Liens
A claim against a property must be paid off before the property can be sold. This can include things like mortgage debt or unpaid taxes.
Listing Agreement
A contract between a seller and their real estate agent, outlining the terms of their relationship. This agreement typically gives the agent the right to market and sell the property on behalf of the seller.
Lock-in Period
The period during which an interest rate is locked in for a loan or other type of financial product. This can protect borrowers from rising rates and result in higher rates if rates fall during the lock-in period.
Mortgage
A loan is used to purchase a property secured by the property itself.
Open House
An event during which a property is open for viewing by potential buyers.
Option Period
A period during which a buyer has the exclusive right to purchase a property is typically outlined in an option contract.
Pre-Approval
A letter from a lender indicating that the borrower has been pre-approved for financing up to a certain amount. This can give buyers an edge when competing for properties.
Principal
The amount of money borrowed or owed on a loan, not including interest or other fees.
Private Mortgage Insurance
Insurance protects lenders against default on loans with low down payments. Borrowers are typically required to pay this insurance if they put down less than 20% of the purchase price.
Public Record
A record of the information is available to the public, typically through government agencies. This can include birth and death records, property ownership records, and court documents.
Real Estate Agent
A professional representing buyers or sellers in a real estate transaction.
Seller’s Market
A market in which there are more buyers than there are properties for sale. This can lead to bidding wars and higher prices.
Zoning
The regulations set forth by local governments dictate how the land can be used. This can include minimum lot size, building height restrictions, and allowable uses for commercial or industrial properties.
The above terminologies are just a few you need to be familiar with when buying or selling a property. Real estate transactions can be complex, so it’s important to understand the process and all of the terms involved.
If you’re ever unsure about something, ask your real estate agent or property management professional for clarification.
