Written by: Olivia Forgette
Dipping your toes into the real estate market can feel daunting. Whether you’re a first-time homebuyer, or a seasoned pro who has been out of the game for a while; specific concepts tend to come up during the process of buying and selling property. This real estate terms cheat sheet can be utilized as a guide to get you through your transaction feeling confident and educated.
Pre-approval is a common term, especially when buying a home. Getting pre-approved for a mortgage before you start browsing available properties with your agent ensures you are financially ready to make the purchase.
You can get a pre-approval letter stating you are qualified for a tentative loan amount from a trusted mortgage lender. During this process, your lender will crunch all your financial numbers, and give you an amount you can afford to spend on a property. If you’re a cash buyer, you won’t need to worry about getting a pre-approval.
As-is is a term that often pops up during real estate transactions for both buyers and sellers. The term as-is refers to the condition of the property. If a home is bought or sold as-is this means that the home is being sold in the condition in which it was when the contract was written. As-is means no improvements will be made by the seller.
This means if the home requires repairs, the buyer is agreeing to pay for the repairs to be made (if they so choose to do so). If something becomes damaged after the as-is offer is accepted, it is up to the seller to bring back the “as-is” condition at the time the contract was written before closing, or the seller must let the buyer out of the contract.
Earnest money is a term that you will hear whether you’re the buyer or the seller in a transaction. Essentially this is a good faith deposit made by the buyer. This sum of money put down after the offer is accepted on the purchase of a house is there to tell the seller you are serious about buying. The money is held in escrow until closing. Then the earnest money funds will go toward the down payment or closing costs of the buyer.
These funds are typically between one-and-three-percent of the total purchase price. If for whatever reason the deal falls apart (due to a poor inspection, or other contingencies), then the buyer will get their earnest money back.
Next on our our real estate terms cheat sheet is the term contingency. This is a term you will certainly hear during a real estate transaction. Contingencies are clause items on your contract which will allow the transaction to terminate if they are not met. A common contingency is a home-sale contingency. This term specifically refers to the need to sell a home before being able to purchase a new one.
There are all kinds of contingencies you may encounter during your transaction. To understand all the different kinds, lean on your trusted real estate professional to explain them to you. Some other common real estate contingencies include:
- Mortgage contingency – A window of time the buyer must secure their financing
- Home inspection contingency – A window of time the buyer has to get the home inspected by a professional
- Appraisal contingency – Ensures the sale price that has been agreed upon is correct for the market value
Next up on our real estate terms cheat sheet is due diligence. You may hear the term due diligence when you are participating in a real estate sale. This refers to the period of time between when the offer is accepted, and closing. The due diligence period is when the buyer can schedule inspections, confirm their financing, and ensure that the home they are buying is in their best interest.
FSBO is a real estate term meaning, “For Sale By Owner.” This means that there are no real estate agents participating or guiding the sale on the seller side (or both sides if the buyer is also working without an agent). If you as the buyer have a real estate agent and are looking to buy a FSBO property, your agent will likely request a signed fee agreement. Which means that the seller agrees to pay the buyer’s agent a commission fee.
This is a common term especially if you are selling a property. Market value is a concept that uses comparable recent sales in your area to give your property a value. Things that can affect your home market value are location, size, condition, and of course supply and demand in the market you’re selling.
An appraisal is the estimation of a home’s current market value. The buyer will hire a licensed appraiser who will use their expertise to determine an accurate estimate of price for any given property. Typically the buyer will pay to have an appraisal completed during the due diligence period.
Closing costs can feel like hidden fees if you aren’t aware of what the term means. These are fees paid at the very end of a real estate transaction. This includes attorney fees, appraisal fees, taxes, and insurance and title fees. Typically closing costs are between two-and-seven-percent of the total sale price. This is additional money to the buyer’s down payment that they must bring to closing.
Escrow is a term that means there is a legal arrangement where a third party receives, holds, and distributes funds until all parties in the transaction meet particular conditions in the contract. Utilizing escrow helps protect both the buyer and seller in the transaction in case some conditions are not met.
When a property listing goes under contract this means that an offer has legally been accepted by the seller, but the sale is not yet final. The property will not officially be sold until all contracts and conditions have been met. This period of time typically takes 30-to-45 days.
We hope you can utilize this real estate terms cheat sheet during your next transaction so you can feel confident and educated. If you or someone you know is ready to make a real estate move, contact Maureen Forgette for top level expertise and service.