Common Real Estate Terms, Explained

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Real Estate

Whether you're thinking of selling or buying a home, there are many real estate terms that you'll likely hear throughout the process. Here’s a breakdown of what they all mean.

Appraisal: An appraisal is a third-party estimate of what a home is worth. When purchasing a home, lenders require appraisals to ensure they're loaning the right amount. If the appraised value is lower than the buyer's offer, the buyer may need to pay the difference.

Broker: A broker is a professional who has obtained a broker's license and understands construction, property management, and real estate law. Real estate agents are supervised by brokers.

Closing: The closing process is the last step of a real estate transaction. On this date, the property is transferred from the seller to the buyer.

Closing costs: These costs can amount to 2-5% of the home's purchase price. Examples of closing costs include appraisal fees and attorney fees.

Deed: A deed is a contract that transfers the title directly from the seller to the buyer.

Down payment: A down payment is the total amount of cash that the buyer pays at closing. Home loans have minimum down payments of 3-5%.

Earnest money deposit: This deposit is around 1-2% of the purchase price and is paid by the buyer when the contract is first signed. It's meant to show the seller you are serious about the transaction.

Escrow: This account is made when a third party holds an earnest money check from the buyer until the transaction is completed. Then these funds are sent to the seller.

Home inspection: An inspection is performed by a third party to identify a property's condition during the closing process. Inspectors will include information about the foundation's stability, the condition of a home's roof, and the state of any major home systems in their report.

Interest rate: This is the cost that the buyer pays to their lender to borrow funds over a set period of time. It's displayed as a percentage.

Lender: A lender is an individual or financial institution that's lending money to an individual buyer to purchase property. The loan will then be repaid with a certain amount of interest.

Mortgage: A mortgage represents an agreement between a lender and borrower that allows the lender to obtain the property if the borrower can't make their loan payments on time.

Pre-approval: Before you make an offer to buy a home, you should get pre-approved by a lender. The lender will check your credit history and income, verify all information, and approve you for a specific loan amount.

With these terms and definitions in hand, you should be better prepared to buy or sell a home. If you have questions about any of these terms or want an overview of what the process looks like for your specific situation, reach out anytime.