Glossary of Terms

Real Estate Terms to Know

 

Absorption Rate: The rate at which homes sale in a given area in a specified length of time. It’s calculated by dividing the number of sales in a given month by the number of homes available for sale.

Appraisal:   A written justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby.

Amendment:  A written change to a contracted agreement signed by both parties involved.

Appraisal contingency: A condition that must be met for a contract to be closed where the appraised value of the property must equal or exceed the purchase price.

Closing costs: Expenses incurred from a real estate transaction. Usually charged by a title company, lender, and HOA is applicable. Closing costs are typically 3-4 ½% of the purchase price.

Comp or Comparable Sale: Properties with similar characteristics (size, layout, finishes, and upgrades) that have recently sold or listed for sale and are used to justify the  price of a property.

Contingency:  A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

Closing date: The date in which the deed and title of a property are transferred to a new owner. Possession of said property may or may not be given on the closing date.

Earnest/trust money: A good faith deposit made by the buyer to show that he or she is serious about buying the house. Earnest money may be forfeited or returned to the buyer if the contract falls through.

Escrow: Funds held by a third party to be used only when a specific condition is met. Example: earnest money funds are held in escrow by the title company or listing brokerage until closing when they are applied to the buyer’s down payment.

Financing contingency: The offer is contingent up the buyer obtaining financing for the property.

Home inspection: A thorough inspection conducted by an accredited third party inspector to assess the functionality and condition of a property. Home inspections are most commonly paid for by the buyer and are written in the contract as a inspection contingency.

Home warranty: A warranty provided by a third party servicer that covers defects or damage to mechanical systems including AC, heating, electrical, plumbing, and major appliances.

Pending: The state of a real estate contract after all contingencies have been removed. A transaction is pending until the closing date.

Processing: The second stage of the mortgage process after the borrower’s application has been completed and income verified.

Lender: An organization or person that lends money.

Loan Officer: A representative of a lending institution that assesses the credit worthiness of potential borrowers to see if they qualify for a loan.

Possession date:  The date in which the seller relinquishes possession of the property to the buyer. The possession date may or may not be on the closing date.

Payoff:  A statement prepared by a lender showing the remaining terms on a mortgage or other loan. The payoff statement shows the remaining loan balance and number of payments and the rate of interest. It also states the amount of interest that will be rebated due to prepayment by the borrower.

Repair proposal: A written list of requested repair items by a buyer compiled upon receipt of the home inspection report.

Sale of Home Contingency: A condition on a purchase contract requiring one party, usually the buyer, to successfully close on their current home before closing on their new property

Termite inspection:  An inspection by a licensed contractor specifically looking for evidence of wood destroying organisms. Not limited to but most commonly termites. In the event of a VA loan, the termite inspection must be paid for by the seller of the property.

Title: The written ownership of a piece of property.

Title insurance: An insurance policy that covers the loss of ownership in a property.

Underwriting: When an individual or business entity seeks funding for a real estate project or purchase, the loan request is scrutinized by an underwriter to determine how much risk the lender is willing to accept. The final stage of a mortgage process.

Warranty deed: A deed that guarantees clear title to the buyer of real property.

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