Don’t Get Lost in Translation: A Guide to Real Estate Terminology

A Guide to Real Estate Terminology

If you’re buying or selling a home, it’s important to understand some key real estate terms. Your real estate agent is like a teacher, and their job is to help you understand everything that goes into the process of buying or selling a home including real estate terminology. They want you to feel comfortable and confident making big decisions, and they’ll work with other professionals like lenders and title companies to make sure everything goes smoothly.

Here are some common real estate terminology you should know:

1. Prequalification vs. Preapproval: Before you can buy a home, you need to talk to a lender to see how much money you can borrow. Prequalification is just a rough estimate based on what you tell the lender. Preapproval is more official and requires you to provide documents like pay stubs and tax returns.
2. P&S Binding: When you’re ready to make an offer on a home, you’ll sign a purchase and sale agreement (P&S). This is a legal contract that outlines the terms of the sale, like the price and any conditions. When everyone involved has signed the agreement, it becomes binding, which means everyone has agreed to the terms.
3. Earnest or Earnest Money: When you make an offer on a home, you’ll typically give the seller some money to show that you’re serious about buying it. This is called earnest money, and it’s usually around 1-2% of the purchase price.
4. Mortgage Insurance: If you don’t put down 20% of the purchase price as a down payment, you may have to pay mortgage insurance. This protects the lender in case you can’t make your payments.
5. Closing Costs: When you close on a home (which is when you sign all the final paperwork and officially buy the home), you’ll have to pay some fees. These are called closing costs, and they can include things like attorney fees and title search fees. Click here to download a free closing costs estimate app.
6. Due Diligence and The Due Diligence Period: When you’re under contract to buy a home, you have a certain amount of time to investigate the property and make sure everything is in order. This is called the due diligence period, and you can usually get out of the contract if you find something you don’t like.
7. As Is Sale: Sometimes, a seller will list a home as-is, which means they won’t make any repairs before you buy it. You can still have an inspection, but you’ll have to accept the home in its current condition.
8. Contingent Vs Pending: When you’re under contract to buy a home, you’re in the contingent phase. This means you’re still working out the details and can back out if you need to. Once everything is settled and you’re just waiting to close, you’re in the pending phase.
9. Seller’s Concession: Sometimes, a seller will offer incentives to buyers to sweeten the deal. These can include paying some of your closing costs or approving certain lenders.
10. Seller Disclosure or Property Disclosure: Before a home is listed for sale, the seller will fill out a form that details everything they know about the property. This can include information about the condition of the home and any other important details, like if there’s a homeowner’s association.

If you’re thinking of buying or selling a home, it’s important to know some common real estate terms. Understanding real estate terminology can help you feel more confident and comfortable throughout the home buying or selling process. Don’t hesitate to ask your real estate agent if there are any terms you don’t understand. You can also do your own research to become more familiar with real estate terminology, and be sure to read and understand any contracts or agreements before you sign them. If you have any questions, your real estate agent is always there to help.