A Real Estate Dictionary
When you’re buying a home or some other piece of property, realtors may use the specialized vocabulary of their profession. It’s a natural human tendency to unthinkingly assume that everyone understands terminology they use every day.
But if you’re not a real estate professional, you may well not understand, and you certainly want to when there’s going to be a substantial mount of money changing hands. To help you out, here are some of the most common terms along with their definitions.
Your Real Estate Glossary
An appraisal is a report of the estimated value of a property. It should come from a qualified third party, and it’s done to provide assurance to the buyer and lender that the house or other property is worth the asking price.
An Association fee, or HOA fee, is the monthly fee housing committees assess to keep up common areas and amenities like the pool. You may well run into these if you’re buying a townhouse or condominium. They’re a cost that’s separate from your mortgage.
A Closing Disclosure, or CD, is a form that itemizes all costs and fees and the distribution of all money to and from both the buyer and the seller.
Closing costs are the expenses associated with a purchase other than the actual cost of the property. Both the buyer and seller are likely to incur these. The buyer probably has to cover loan fees while the seller pays commissions to real estate agents.
Collateral is something of value held to ensure repayment of a loan or mortgage. If you’re buying a house, it normally is the house.
Comparables are properties in the same area with similar features that have recently sold. The sale prices provide an estimate of the value of the home you’re interested in.
Contingencies are conditions that must be met before the lender will approve your loan. Home inspection is a good example. Contingencies must generally be met by a certain deadline. If they’re not, the contract can be cancelled.
A counteroffer is a seller’s response to your offer provided he or she isn’t simply accepting it.
Earnest money is the money you have to deposit with the seller when you submit an offer. A third party holds it in trust. Earnest money demonstrates you’re serious about making a purchase. When you close, it will likely be applied to your down payment or closing costs.
Escrow can mean a couple different things. When you pay earnest money, the third party is said to hold it “in escrow.” The term is also used to refer to the time period between the writing and acceptance of the contract and the completion of the purchase.
The principal is the amount of money you actually borrowed. It’s a sum that doesn’t include the interest.
REO properties, or real estate owned properties, are properties owned by a bank or other financial institution that loaned money to the former owner. They typically end up in the bank’s possession due to foreclosure.
A short sale is one in which the seller’s lender authorizes a sale for less than the seller owes on his or her mortgage.
A title, or title deed, is the document that demonstrates ownership of a property. It includes information about the history of ownership and transfers of the property.
Underwriting can refer to the process by which a homebuyer is evaluated regarding his ability to obtain and pay off a loan, This generally involves a credit check and appraising the property. Underwriting is also the term for a search of historic documents to determine whether title insurance can be issued and if so, whether any special conditions or exceptions will apply.
Real Estate Terminology: Now You Know
Now that you know the lingo, you should find it easier to navigate your way through a real estate purchase. But if you ever feel lost, don’t be shy about asking for clarification. Remember, it’s your money!
True Title, Inc.