Real Estate Terms to Know
Real Estate has many unique terms and sometimes they can easily blend together and cause confusion!
Below are definitions of common real estate terms to help guide you on your individual transaction.
Pre-Qualification Letter – A loan officer’s opinion of a buyer’s ability to purchase a property. This is required to be provided to a seller when submitting an offer for a property that will be financed.
Proof of Funds – An account statement showing a buyer has the ability to purchase the property with cash. This is required to be provided to a seller when submitting a cash offer on a property. Any statement must included the buyer’s name however, the account number can be redacted (crossed out).
Listing Price – The price a seller has decided to sell their property for.
Equity – The difference between the fair market value of a specific property and the amount owed on it’s mortgage (and any other liens.)
Offer – The price and terms a buyer is willing to extend a seller in hopes to obtain their property.
Down Payment – The amount of money needed to initially purchase a property. This amount varies due to loan type. This must be paid out of pocket and cannot be financed.
Title Company – A company that ensures clear title and completes the necessary procedure to transfer a property from its current owner(s) to it’s new owner(s).
Escrow Deposit – A good faith deposit showing a seller you are serious about purchasing a property and truthfully believe you have the ability to do so. This is similar to a security deposit. The escrow deposit amount provided will be credited toward final costs at closing.
Clear Title – A title that is free of liens or encumbrances.
Home Owner’s Association – A non-profit group that manages the common areas and maintains order in a specific community.
Inspection – A in depth look into the property to locate any issues that may be present.
4 point Inspection – A inspection that focuses on the four most important points of a structure (roof, air conditioning, electrical, and plumbing). This is required for insurance purposes.
Survey – A document that points out the property lines of a particular property. This is obtained by a licensed surveyor.
Wind Mitigation – A report that states the age and condition of a roof. This is also required for insurance purposes.
Closing Costs – Fees that must be paid at the time of closing. This often includes pro-rated taxes and home owner’s insurance.
Home Owner’s Insurance – An insurance policy that insures a dwelling and it’s contents. Home owner’s insurance is required for all mortgages. If an individual lapses in their insurance coverage, the bank can impose their own on the dwelling. This often comes with a high price tag.
Contingent Listing – A seller accepted an offer from a buyer however the offer included specific terms that must be met.
Pending Listing – A Seller has accepted an offer.
Closed Listing – A seller has officially transferred ownership of a property to a buyer.
Backups – A Seller has accepted an offer from another buyer however, they are willing to accept back up offers in case the offer they accepted does not work out.
Active Listing – A listing is available for sale.
Comparable Sales (aka Comps) – Recent sales of similar properties in close proximity to the property in question.
Comparative Market Analysis (aka CMA) – A Realtor’s report using comps stating what a specific property could potentially be worth.
Deed – A legal document transferring ownership of a specific property.
Closing – The specific time all documents transferring title are completed, and the property under contract is officially paid for by either the buyer themselves or the mortgage company. At this time, the buyer officially becomes the new owner and is given the keys to the property.
Appraisal – A report stating the opinion of a property’s value. This value must match the purchase price on the contract to obtain the home loan in entirety.
Inspection period – The total number of days in which a buyer has to do a thorough inspection. During this period, a buyer may decided to back out of the deal and receive their escrow deposit back with no penalty.