Selling a home can be incredibly stressful. This is because so much of the process is completely out of your control and you spend so much time waiting in the hopes that everything will go smoothly.
One of the things that can make it feel stressful is the extensive vocabulary of real estate terms. By understanding what different important terms in real estate mean, it can help reduce your sense of uncertainty about the process.
Are you wondering what terms you should understand when it comes to selling a home?
Let’s take a look at what you should know.
Common Real Estate Terms: The Basics
Before we get into the nitty-gritty, let’s take a look at some of the most common real estate terms. You’ll want to understand what these mean whether you are buying or selling a home.
When a property is listed as being sold “as is” means that the seller isn’t interested in making any repairs or concessions as a part of the sale. This also might mean that it is being sold at a lower price because it is expected that the buyer will have to do work to the property.
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The closing of a real estate deal is the final event of the home selling process. All parties must sign all of the required documents, the money exchanges hands, and in some places the deed is recorded with the county clerk.
At this point, the buyer is given the keys and is now the owner of the property.
There are a number of fees associated with the closing. These are usually paid as a part of the closing and go to pay real estate agents, taxing authorities, insurance companies, attorneys, the title company, the lender, and other related parties.
Days on Market
This real estate term refers to how many days a property has been listed on the MLS. You can look at the average days on market in various locations to get a sense of the real estate market there.
Homeowner’s Association (HOA)
An HOA is a private association that manages a condominium or a planned community. If you decide to purchase a home that is managed by an HOA, you are agreeing to follow the rules of the HOA and pay its annual or monthly dues. HOA’s often have the ability to foreclose on the property or file a lien against the property if you fail to comply or pay the fees.
Listing Agent/Buyer’s Agent
The listing agent is also known as the seller’s agent. This is the real estate agent that the seller has signed a contract with to help them market, negotiate, and sell their property. The buyer’s agent is a real estate agent hired by the buyers to help them locate the right property, negotiate, and purchase the property.
Multiple Listing Service (MLS)
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A realtor and a real estate agent aren’t actually interchangeable terms. A realtor is a member of NAR (the National Association of Realtors). This means that they have promised to uphold the organization’s Code of Ethics.
Real Estate Terms For Sellers and Buyers
There are different types of sales when it comes to real estate. Understanding these terms can help whether you are on the selling or buying side of the deal.
This is a sale when the property is either owned outright or when the owner owes less on the mortgage than how much they plan to sell it for. This type of sale is in contrast with other types of sales such as short sales, foreclosures, and probate-related sales.
This occurs when a homeowner passes away without leaving the property to someone or having a will. The probate court will then authorize a representative to sell the home with the help of a real estate agent. These types of sales typically take more time than conventional sales because the process is a bit more complicated.
This is a type of sale where the property is being sold for less money than the debt that is secured by the property. The seller’s lenders have to approve this type of sale, as the sale of the house won’t be enough to cover the amount of money owed.
The approval process for short sales by lenders is typically very slow. This means that selling a house through a short sale usually takes quite a bit longer than a conventional sale.
This real estate term means that a property is not being sold by a private party but instead to a trustee of a living trust. This is typically because the original homeowner has moved their assets into a living trust or is no longer alive.
It’s worth understanding what this term means because it could be advantageous to buyers. A trustee might not be as emotionally attached to the home as the owner had been, for example. This means that they might be willing to sell the home faster by accepting a less attractive offer.
Important Real Estate Terms: Financing
Financing is obviously a major part of the home selling process. These are some terms you will want to understand that pertain to lending and the buying process.
An adjustable-rate mortgage is a type of loan. Usually, there is an initial fixed-rate period. Once this period is up, however, the interest rate can fluxation, which means that this is a less predictable type of loan.
Mortgage lenders use your debt-to-income ratio to determine the size of a loan that they are willing to give you. It is common for lenders to look for borrowers that have a debt-to-income ratio under a certain percentage when it comes to paying for housing and paying for debt.
Earnest Money Deposit
This is sometimes referred to as a “good faith deposit.” This is the initial money that a buyer puts down after their offer has been accepted by the buyer.
Equity refers to how much investment an owner has in a property. Their equity is calculated by subtracting any mortages or liens from the market value of a home.
This is one of the loans that is backed by the federal government. This means that the FHA insures private lenders and banks that, in the event that a borrower doesn’t fully repay a loan or pay on time, the losses will be covered.
This is a type of mortgage where the interest rate is fixed over the life of the loan. This is the most common loan type, with 75% of all residential mortgages in the U.S. being fixed rates.
To get pre-approved for a home loan, buyers have to apply to lenders and share with them their financial information. The lender then gives them a letter stating how much money they can be loaned in order to buy a property.
A pre-qualification letter outlines an estimate from a lender for how much a home buyer can expect to be approved for. This is a quicker assessment than a pre-approval.
The principal balance of a mortgage loan is how much money a borrower owes the lender without including the interest. Every month, buyers pay a mortgage that includes both the principal and interest. It is common for home loans to be amortized, meaning that the buyer is paying more towards the interest than the principal at the start of the loan.
Proof of Funds
Sellers require that you submit proof that you can purchase the property when you make an offer. This is a way to show them that you will be able to go through with the deal, as you will display that you have the funds to cover the closing costs and down payment.
Purchase and Sale Agreement
This is the written contract between the buyer and the seller. In this document, the terms under which the property will be bought and sold are outlined.
If you look at listings online and see a property that is “under contract,” it usually means that a buyer and a seller have entered a contractual commitment to transfer the property through sale.
This is information given by the seller regarding the property. The laws about what must be disclosed by sellers vary between states.
Are you wondering what mistakes you should avoid when you are selling your home? Check out this article!
This is a government-backed loan. It is available to members of the military and sometimes even to their spouses.
Important Terms in Real Estate: Offers and Contingencies
When you’re selling a house, it’s a huge relief to get an offer. The process isn’t over yet, though. Let’s take a look at the terms you should know about this part of the process.
The mortgage lender usually requires an appraisal of a property. A professional appraiser is sent to the property to determine the value of the home.
This is a clause that is often included in a purchase and sales agreement. It allows the buyer to walk away from the agreement if the sales price is higher than the appraised value.
Separate from the appraisal, a professional inspection also occurs during the sale process. They will create a report on the condition of the property and any repairs that might be needed.
This is also referred to as a “due diligence contingency.” This means that the buyer can renegotiate or walk away from a deal based on information that comes up during the inspection if it wasn’t previously disclosed.
This is an addendum or clause in the contract that allows buyers to walk away with their deposit if they aren’t able to secure a mortgage during a set period of time. This is also known as a mortgage contingency.
When buyers want to purchase a home, they make a formal offer. This offer can be for the full list price or above or below it. The seller might accept the offer or they might make a counteroffer.
It is common for sellers to coffer concessions to sweeten the deal for buyers. This might mean contributing to the closing costs of the buyers or agreeing to make certain repairs.
A title search is a standard part of the property transfer process. This takes a look at public records on the home including purchases, sales, liens, and taxes.
Do You Want to Make Your Home Selling Process as Simple as Possible?
When you decide to sell your house it can end up feeling like you’re taking a crash course in real estate terms and processes. The whole thing can be a giant headache, but many people feel that they don’t have any options other than the sometimes long, drawn-out process of hiring a real estate agent and listing a home on the MLS.
If you want to sell your house fast and don’t want to deal with endless showings, open houses, and the uncertainty of waiting for a buyer to lockdown financing, you might consider selling your house for cash. When you sell your house for cash, you don’t have to clean, declutter, make any repairs, or deal with hosting showings.
Is it time to sell your house fast? If so, get your free offer today!