Even if you’ve bought or sold a home before, there’s just some real estate terminology that doesn’t seem to make any sense. And sometimes, doing research online can make you feel even more confused than before! That’s why we’ve put together a glossary of some of the most important real estate terms, without all the jargon.
The Most Common (and Confusing) Real Estate Terms You Should Know
Real estate terminology might seem like another language—after all, words like escrow and contingencies aren’t usually in our everyday vocabulary! Here’s a full list of some of the most common terms to get you started. And if you don’t see a certain word listed here, you can always contact us with questions.
A home is active contingent when a seller accepts an offer, but it’s contingent upon the buyer’s ability to meet certain conditions before the next step of the sale.
An appraisal is an estimate of a home’s true value from an unbiased party. Most of the time, mortgage lenders will use a professional appraiser to make sure a home’s price is accurate before they issue a loan to a buyer.
Closing costs are the fees you pay before the end of a real estate transaction. They can include, but are not limited to, legal and mortgage fees, agent commission, home inspections, and title searches. They typically cost about 2 – 5% of the total purchase price.
This is the amount you pay to your agent for their services. Commission rates are typically 5 – 6% of the home’s sale price. Oftentimes, the seller will pay the commission for both agents involved in the transaction.
Comparative Market Analysis (CMA)
This comprehensive report uses recent sales in a local area to calculate how much a particular home is worth.
Contingencies refer to specific conditions that have to be met before a sale can be finalized. Common contingencies include home inspections or buyer financing.
This is a deposit put down by a home buyer when they make an offer. This money shows that they’re serious about buying a home, and it usually goes towards closing costs if they proceed with the sale. The seller keeps this money if the buyer backs out of the contract.
Escrow is a period during the home buying process when a third party holds something of value (usually an earnest money check) until certain conditions are met, such as the fulfillment of the purchase agreement.
A mortgage broker is someone that can help you shop for the right home loan. Because they don’t represent a specific lender, they can get you the best rates possible.
Multiple Listing Service (MLS)
The MLS is a combination of over 700 regional databases that contain listings for a particular area. Agents pay dues to access these databases and post their listings. Buyers can look at the MLS for free to see all available homes.
This is a letter from a lender that says you’ve been pre-approved for a mortgage. To get a pre-approval letter, a lender will check your credit and verify your personal information. From there, you’ll be approved for a specific loan for up to 90 days.
Real Estate Agent
This is a person that’s licensed to negotiate real estate transactions. Oftentimes, they must work under a supervising broker.
Real Estate Broker
A broker is a step above a real estate agent. To become a broker, agents must pass a broker exam and undergo more educational training. Brokers can also hire and supervise real estate agents.
A Realtor is a real estate agent who is a member of the National Association of Realtors. To become a Realtor, agents must complete training courses and adhere to a strict code of ethics outlined by the NAR.
A short sale is when a homeowner sells their home for less than what they owe on their mortgage. This allows the lender to recoup some of the money they’ve lost.
Have More Questions About Real Estate Terminology?
If you have any questions about these terms, or if you’re getting ready to buy or sell your home, just give the Yoder-Barnhart Team a call! We’d be honored to help you jumpstart your real estate journey here in Central Ohio.