Having a basic understanding of real estate terminology before starting the home buying or selling process will give you peace of mind when you're deep in negotiation. Here are some of the most common terms you may hear throughout the process. If you have any questions our Realtors are pleased to answer them.
Active Under Contract: There is a contract that has been accepted by the sellers but there are contingencies that still need to be met before the transaction can close.
Adjustable Rate Mortgage (ARM): A type of mortgage loan whose interest rate is tied to an economic index, which fluctuates with the market. Typical ARM periods are one, three, five, and seven years.
Agent: The licensed real estate salesperson or broker who represents buyers or sellers.
Appraisal: A document of opinion of property value at a specific point in time.
Broker: A state licensed individual who acts as the agent for the seller or buyer.
Buyer’s Agent: The agent who shows the buyer’s property, negotiates the contract or offer for the buyer, and works with the buyer to close the transaction.
Buyer Broker Agreement: An agreement that specifies the duties and the scope of services a buyer’s representative agrees to provide to the buyer as well as specifying the buyer’s responsibilities.
Closing: The end of a transaction process where the deed is delivered, documents are signed, and funds are dispersed.
Commission: The fee charged by a broker or agent for providing services related to a real estate transaction such as marketing the property, bringing the parties together, and negotiating a purchase contract or loan.
Comparative Market Analysis: A study done by real estate sales agents and brokers using active, pending, and sold comparable properties to estimate a listing price for a property.
Contingency: A provision in a contract requiring certain acts to be completed before the contract is binding.
Earnest Money Deposit: The money given to the seller at the time the offer is made as a sign of the buyer’s good faith.
Inspection: Home inspections are required once a potential buyer makes an offer. Typically, they cost a few hundred dollars. The purpose is to check that the house’s plumbing, foundation, appliances, and other features are up to code. Issues that may turn up during an inspection may factor into the negotiation on a final price. Failing to do an inspection may result in surprise costly repairs down the road for the home buyer.
Listing: Brokers written agreement to represent a seller and their property. Agents refer to their inventory of agreements with sellers as listings.
Listing Agent: The real estate sales agent that is representing the sellers and their property, through a listing agreement.
Listing Agreement: A document that establishes the real estate agent’s agreement with the sellers to represent their property in the market.
Multiple Listing Service (MLS): A service that compiles available properties for sale by member brokers.
Offer: This is the initial price offered by a prospective buyer to the seller. A seller may accept the offer, reject it, or counter with a different offer.
Pending: A real estate contract that has been accepted on a property but the transaction has not closed.
Pre-approval: A higher level of buyer/borrower pre-qualification required by a mortgage lender. Some pre-approvals have conditions the borrower must meet.
Pre-qualification: The mortgage company tells a buyer in advance of the formal mortgage application, how much money the borrower can afford to borrow. Some pre-qualifications have conditions that the borrower must meet.
Real Estate Agent: An individual who is licensed by the state and who acts on behalf of his or her client, the buyer or seller. The real estate agent who does not have a broker’s license must work for a licensed broker.
Real Estate Contract: A binding agreement between buyer and seller. It consists of an offer and an acceptance as well as consideration (i.e., money).
Seller Property Information Report (SPIR): A report completed by the Seller, based on the Seller’s knowledge of the property condition. This report does not replace the need for a property inspection by a professional.
Under Contract: A property that has an accepted real estate contract between seller and buyer.
Walk-through: A showing before closing or escrow that permits the buyers one final tour of the property they are purchasing.