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If you’re new to the real estate industry, most of the terms you will encounter will be unfamiliar to you. It’s a good idea to do some research before delving into the world of real estate. To help you, we‘ve rounded up 19 common real estate terms and their meanings. Whether you’re buying or selling a property, you’re bound to come across some of these terms outlined below.
1. As-Is
This means a buyer must accept the property in its current condition. While a buyer has the right to inspect the goods before making a purchase, the seller is not liable for any flaws discovered after the sale.
2. Broker
Brokers are real estate professionals who have completed additional training and licensing requirements to ensure that they are well-versed in the laws governing real estate and property management. In order to comply with the law, they have to supervise a group of real estate agents.
3. Closing
Real estate transactions end with closing, which occurs most frequently when purchasing real estate. Here, ownership of the property officially transfers from the seller to the buyer on the closing date agreed upon.
4. Contingency
To avoid the other party canceling the contract because of a contingency, you must meet your end of the bargain. instance, a buyer may make an offer that is conditional on the building being cleared by a certified home inspector. If it’s not cleared, the condition hasn’t been met, and the buyer has the right to reject the deal.
5. Default
The term “default” refers to when a borrower, such as a homeowner, fails to make their required loan payments. When homeowners miss three or more payments, they are said to have defaulted. When a borrower defaults on a loan, the lender has the right to demand repayment in full.
6. Delinquency
When a borrower does not make the required payments, the loan is considered delinquent. Delinquent loans are those whose payments are more than a month past due. If a borrower pays off all of their past-due bills, their delinquent status will be cleared. The longer a loan is delinquent, the more likely it is that it will be declared defaulted.
Learn more: Delinquent VS Default
7. Due Diligence
Due diligence refers to the reasonable steps you’d expect someone to take when buying or selling a house. It is the buyer’s responsibility to investigate. The seller may not be liable if the buyer didn’t ask for a home inspection before buying and later discovered a problem with the property.
8. Home Inspection
A home inspection is carried out by a qualified third party to determine the state of the property and identify any major flaws in the structure, safety, heating and cooling, and more. Before granting a mortgage to a prospective buyer, most lenders require a home inspection to ensure that it is a sound investment.
9. Homeowner’s association (HOA)
An HOA is a private organization that is in charge of general property maintenance and governance, such as in gated communities. Buyers who purchase a home in an HOA community are required to join the association and pay annual or monthly dues.
Check out this post: A Realtor’s Top 7 Shocking Yet Common Questions
10. Realtor
This is a real estate agent who is a member of the National Association of Realtors (NAR). The NAR has membership fees and adheres to a strict code of ethics.
11. Real estate agent
One who works as a real estate agent is licensed by the state to represent buyers and sellers of property. Real estate agents must be employed by a brokerage and can register as realtors with the NAR.
12. Appreciation
Property appreciation is the rise in value that occurs over time. For example, if a community has grown in popularity and the homes in it have appreciated in value, a townhouse purchased 30 years ago may have appreciated significantly.
13. Equity
Equity is a measure of how much of a house a buyer owns. The lender retains ownership of the house until the loan is fully paid off. If a buyer puts down $20,000 on a $100,000 house, for example, they own 20% of the property. With each mortgage payment, equity grows.
14. Federal Housing Administration (FHA) Loan
FHA loans are a government program designed to help first-time homebuyers qualify for a lower down payment and better mortgage rate. Because the FHA insures the loan, lenders have more faith in the buyer’s ability to repay the loan.
15. Appraisal
Another party (an appraiser) conducts an appraisal of the property to ensure its accurate valuation. To make sure the loan is for the correct amount, most lenders require an appraisal before approving a loan to a homebuyer.
16. Assessed Value
Tax assessors determine the assessed value to know how much a homeowner owes in property taxes. Inspection notes and comparable home prices help the assessor estimate a home’s market value and the corresponding property tax.
17. Foreclosure
When a borrower is unable to make their mortgage payments for an extended period of time, their lender will foreclose on the house. This means they take possession of the house and sell it to cover the remaining debt. When it comes to helping their clients buy foreclosed homes, some real estate agents specialize in foreclosures.
18. Commission
Both the buyer’s and seller’s real estate agents earn commissions for their efforts in coordinating the home sale. The commission is split equally between the two agents and is calculated as a percentage of the total home cost (usually around 6%).
19. Pre-Approval Letter
In order to get an estimate of their loan approval, buyers sometimes get their finances thoroughly checked by their lenders. You’ll receive a letter with this estimate in the form of a “pre-approval letter”.
Bottom line
Now you’re prepared to begin your journey into the world of real estate. You will come across many terms – most of which are not listed here – but don’t fret. Don’t be afraid to ask questions; your agent is n hand to assist you on your journey. Do you know more important terms that aren’t listed here? Tell us in the comments section.
