Real Estate Key Terms to Know
1. Adjustable-rate mortgage (ARM)
Adjustable-rate mortgages have interest rates which change periodically. A homebuyer with an adjustable-rate mortgage can start with lower monthly payments compared to a fixed-rate mortgage, but the changing interest rates mean that monthly payments have the ability to go up later on.
2. Amortization
Amortization is the term used for the schedule of mortgage installment payments over a period of time. In real estate, a typical buyer’s amortization schedule is one payment per month over 15 or 30 years.
3. Appraisal
A real estate appraisal is a process designed to develop an accurate opinion of value for real property. In a real estate transaction, a lender often requires an appraisal performed by a third party to ensure that the amount requested for the loan accurately reflects the property’s fair and current market value. In situations wherein a home’s appraised value is less than what the buyer offered, the lender may request the buyer to cover the cost’s difference.
4. Buyer’s agent
A buyer’s agent is a real estate agent who is legally licensed to assist buyers during the home-buying process. They represent the buyer’s interests exclusively during a real estate transaction. Some of their responsibilities include negotiating the best possible price for a home, providing information on the neighborhood and its surrounding area, ensuring the home is inspected, and conducting due diligence.
5. Closing
Closing is the final step in the home buying and selling process, and is one of the most important real estate terms to know. The buyer and seller agree upon the closing date during the negotiation phase, and it is typically set weeks after the offer is accepted. At closing, ownership of the property is officially transferred from the seller to the buyer, and all necessary payments are made. Afterward, the buyer can then move in or start renovating the property.
6. Closing costs
Expenses incurred by home buyers and sellers to finalize a real estate transaction are known as closing costs. These may include appraisal fees, taxes, loan origination fees, credit report fees, title insurance, and so on. In most situations, the buyer usually pays from 2% to 5% of the home’s purchase price, although closing costs can be paid by either the buyer or the seller.
7. Property deed and title
Deed and title are two terms that are often used interchangeably. But while they’re closely related, there’s a difference between the two. The title is a concept and not a physical document. It represents legal ownership of the home and all of the rights that are transferred from the seller to the buyer. The deed on the other hand, is a physical, legal document that conveys the title to the new owner after a home is sold. It includes a description of the property and identifies the grantee (buyer) and grantor (seller) of a specific transaction.
8. Down payment
The down payment is the amount paid by the homebuyer during the closing period. Most home loans require a 20% down payment, while several conforming loans only require a down payment of 5%. There are also loans offered by the Federal Housing Administration (FHA) that accept a 3.5% down payment.
9. Equity
The part of the property officially owned by an individual is known as home equity. While a person does have ownership of a property they have purchased, the mortgage lender has an interest in the property until it’s completely paid off.
10. Escrow
Escrow is a step in the home buying or selling process that happens when a neutral third party holds something of value (often the buyer’s earnest money check) during a real estate transaction. Once the transaction is completed during the closing period, the third party will then release the funds held during escrow.
11. Fair market value (FMV)
One of the key real estate terms and definitions all agents should be familiar with is fair market value, which is an accurate representation of a property’s value or worth. Simply put, it is the price a property would sell for on the open market, under the condition that the buyer and seller are both well-informed regarding the property, are acting in their best interests, and are not pressured for any reason to complete the transaction.
12. FHA loans
A Federal Housing Administration or FHA loan is a mortgage issued by a lender approved by the FHA and insured by the agency itself. An FHA loan is designed for low to moderate-income homebuyers and requires lower minimum down payments and credit scores compared to other conventional loans.
13. Fixed-rate mortgage
A fixed-rate mortgage features an interest rate that remains constant throughout the loan’s lifetime, providing borrowers with greater predictability and stability during the loan’s duration. It is one of the most common types of loans available, and is preferred by many consumers due to its long-term reliability.
14. Foreclosure
Foreclosure is a legal process that occurs when a homeowner is unable to make a mortgage payment, typically for a period exceeding 90 days. In a foreclosure, the owner forfeits all of their rights to the property. Should the owner fail to pay off any outstanding debts on the property or sell it through a short sale, the home will enter a foreclosure auction. If it’s still not sold during the auction, the lender will then have control over the property.
15. Homeowners’ association
A homeowner’s association, or HOA, is a private organization within a planned community, subdivision, or condominium tasked with creating and enforcing rules for the homes in the community and its residents. Those who buy a property within an HOA’s jurisdiction are automatically included as members and are required to pay dues or HOA fees.
16. Home inspection
A home inspection is a non-invasive examination of a home’s condition, and is often performed in connection with the sale of that home. They are typically conducted by a professional home inspector who has received proper training and holds the necessary certifications to perform the inspection. After the inspection, the inspector provides the client with a written report of the findings, which the client can use to make informed decisions about their pending property purchase.
17. Internet Data Exchange (IDX)
Internet Data Exchange (IDX) is a set of licenses, regulations, and technologies that allow real estate agents to access MLS listings, use the listings on their websites, and display the information publicly. “Broker Reciprocity,” a term used interchangeably with IDX, is a rule that gives collective permission to display listings from the MLS. Brokers who opt into IDX grant other participants the right to display their listings, while also receiving the right to display listings from other participants. IDX is designed to help agents promote and market listings, attract more leads, and close more sales.
18. Listing
A listing is a written agreement, contract, or arrangement for the marketing and selling of real property through a broker or real estate agent for a specific period. It gives an agent sole authority to handle the sale of the property in exchange for a fee or commission for their services. For Local Listing, Click Here.
19. Multiple Listing Service (MLS)
The Multiple Listing Service or MLS is a collection of over 700 regional databases populated by listings. Each database contains its own set of listings, which agents can get access to by paying dues. Member agents are permitted to share listings across different regions without incurring dues for each one. The MLS is widely regarded as the most comprehensive listing service available today.
20. Offer
In the real estate business, homebuyers need to make an offer on a property they want to purchase. An offer can be for the home’s full list price, or what the buyer and their agent consider a fair market value for the home. Buyer’s agents are in charge of putting the formal offer in writing before submitting it to the seller’s agent. In case the seller opts not to make a counteroffer, he or she can approve the offer immediately, which turns it into a purchase contract.
21. Pre-approval
A homebuyer who is pre-approved means a lender has verified their information, checked their credit, and has approved them for a specific loan amount for up to 90 days. The process requires buyers to fill out an application in order to allow a lender to examine their current financial situation, including their creditworthiness, debt-to-income ratio, and ability to repay. Additional Information Here.
22. Pre-qualification
Pre-qualification is the first step to getting pre-approved for a loan. It is meant to give a homebuyer an idea of how much of a loan they’ll be able to qualify for. The pre-qualification process is based on data submitted by a consumer, whereas the pre-approval process uses only verified consumer data, such as credit checks, for example.
23. Probate sale
Probate sales occur when a homeowner passes away without having written a will or left the property to someone else. The probate court will authorize an estate attorney to hire a real estate agent, who will then be tasked with selling the property. Compared to a conventional sale, probate sales are generally more complex and can take longer to complete.
24. REALTOR®
A REALTOR® is a licensed real estate professional who is a member of the National Association of Realtors. The term (in all caps and followed by the registered trademark symbol) is designed to inform people that the practitioner adheres to a strict Code of Ethics that protects customers, other real estate agents, and the public. Protected by federal law and owned by the NAR, the REALTOR® trademark is one of the key benefits for members, distinguishing them from other real estate licensees.
25. Seller’s agent
A seller’s real estate agent is a professional who exclusively represents a seller of a property during a real estate transaction. They assist the seller by performing certain duties such as collecting data and selling prices of comparable homes, marketing the property, and advising clients on choosing the best offer received for the property.
26. Seller disclosure
A seller disclosure is a document issued by a home seller to a buyer. It outlines any existing issues with the property and other important details buyers need to know about the home. It typically includes repairs performed on the home, details on defective systems or appliances, and a history of leaks and other environment-related issues.
27. Short sale
A short sale occurs when a property is sold for less than the amount owed on its mortgage. In a short sale, the seller pays for the difference between what is owed and what the home sells for. These are often used as an alternate option by homeowners and banks to avoid foreclosure.
28. Title search
A title search is an examination of public records that show a home’s history, including previous purchases, sales, real property taxes, and other types of liens. A title examiner searches to determine who is listed as the property’s record owner. This information, along with any issues or liens recorded against the property, will be included in the preliminary report, which parties will review before the close of escrow.
29. Trust sale
Homes sold by a trustee and not a private party are known as a trust sale. This often occurs because the original homeowner has passed away and has assigned their assets into a living trust. Trustees who have never occupied the property for sale are not required to offer the same disclosures as sellers in a conventional sale.
30. VA loan
A Veterans Affairs (VA) loan is a type of home loan specifically designed for US military veterans and their surviving spouses. This type of loan is designed to assist veterans who are looking to purchase a property without needing a down payment or mortgage insurance. VA loans are available through banks and mortgage companies. A percentage of VA loans are guaranteed by the federal government, allowing banks to offer more advantageous loan terms.
Kimmy Ostrom, REALTOR®
Cloud 9 Realty Group, LLC
(316) 665-6477
