Essential real estate terms everyone should know

If you’re new to the world of real estate, there are a lot of terms that can be confusing. To help you, we’ve compiled a list of 10 essential real estate terms that everyone should know.

Appraisal:

An appraisal is an estimate of a property’s value, typically performed by a professional appraiser. A review is a process of estimating the value of the real estate. Appraisers consider various factors, including the property’s location, condition, and size. They also look at comparable sales in the area to determine how much the property is worth.

Licensed appraisers typically perform appraisals, but anyone can review if they have the necessary skills and knowledge. Thoughts are important for buyers and sellers, as they help ensure a fair and equitable sale price. For buyers, an assessment can help to avoid overpaying for a property. An appraisal can help sellers ensure the property is properly priced and marketed.

Assessed value:

This is the value of a property determined by a government assessment for taxation. The assessed value is the value of a real estate property used by the government to decide how much taxes are owed. The assessor will look at the property’s sale price and any improvements made to develop the assessment. In some cases, the assessed value may be lower than the actual market value of the property, saving the owners money on their tax bill.

However, the assessed value could also be higher than the market value, which could result in a higher tax bill. Estimated values are usually reviewed every few years to remain accurate.

Closing costs:

These are the costs associated with closing on a property, including things like fees for inspections and title insurance. Several charges are associated with the transaction when buying or selling a home. These costs are typically referred to as “closing costs.” Closing costs include real estate taxes, loan origination fees, appraisal fees, title insurance, and more. The closing costs will vary depending on the price of the home, the type of loan being used, and the property’s location.

In most cases, the buyer pays closing costs at the time of closing. However, in some cases, the seller may agree to pay some or all of the closing costs. Knowing all potential closing costs is important before entering a real estate transaction.

Contingency:

A contingency is a condition that must be met for a real estate transaction to occur. For example, a common contingency is a buyer obtaining financing. In real estate, a contingency is a condition that must be met for a contract to be finalized. For example, a common contingency is the successful completion of a home inspection. If the examination reveals any major problems with the property, the buyer may back out of the contract or negotiate for a lower price.

Another common real estate contingency is loan approval. If the buyer cannot secure financing, they may withdraw from the deal again. While contingency clauses can protect both buyers and sellers, they can also create uncertainty and delay the closing of a sale. As a result, it is important to fully understand each contingency before entering into a real estate contract.

Escrow:

Escrow is when money or property is held by a neutral third party and released only when certain conditions are met. It is a process in which a third party controls and regulates the payment of funds required for two parties to complete a real estate transaction. The escrow agent is typically a neutral party responsible for ensuring that all conditions of the sale are met before releasing the funds to the seller.

The escrow process can provide buyers with peace of mind that their earnest money deposit is being held safely. For sellers, it can ensure that they receive full payment once the sale is complete. In most cases, escrow is managed by a licensed real estate agent or broker.

Earnest Money Deposit (EMD):

Buyers make this deposit to show they’re serious about purchasing a property. The EMD is typically held in escrow and applied toward the purchase price at closing. A real estate Earnest Money Deposit (EMD) is a sum of funds a buyer pays a real estate seller as part of an offer or contract. An EMD typically equals 1-3% of the purchase price and shows the seller that the buyer is serious about buying the property.

The real estate agent or attorney holds the deposit in escrow until the deal closes. If the buyer backs out or cannot obtain financing, the earnest money may be forfeited to the seller. The earnest money may sometimes be applied toward the home’s purchase price.

Listing:

A listing is a contract between a homeowner and a real estate agent, giving the agent the right to market and sell the property.

Listing is the process of marketing a property for sale with the assistance of a real estate agent. The agent will help determine the home’s listing price and handle all aspects of marketing the property, from creating listings to scheduling showings. In most cases, the agent will receive a commission from the sale of the property, typically a percentage of the sale price.

Listing a home can be a convenient way for sellers to sell a property without handling all the details independently. However, it is important to note that real estate agents typically charge for their services, so sellers should be sure to factor in these costs when pricing their homes.

MLS:

MLS, or Multiple Listing Service, is a real estate database agents and brokers use to list properties for sale. The MLS allows agents to list properties in one central location, making it easier for buyers to find properties that meet their needs. Additionally, the MLS provides information about each property, including square footage, price, number of bedrooms and bathrooms, and other important details.

This information helps buyers decide which properties to view and offer. Real estate agents must be members of the MLS to list a property, but buyers do not need to be members to search for properties.

Offer:

An offer is a proposal to purchase a property at a certain price. In real estate, a bid is a proposal to buy a property. When somebody makes an offer on a property, they typically intend to buy it. A request usually includes the amount of money the buyer is willing to pay and any conditions they attach to the sale.

For example, a buyer might offer a property contingent on getting a loan. If the seller accepts the request, the two parties will enter into a contract. Once a contract is in place, the buyer must purchase the property at the agreed-upon price.

Zoning:

Zoning is the regulation of land use by a municipality, typically to limit or specify types of development. Zoning is a term used in real estate to divide a piece of land into sections that will be used for different purposes. For example, a part of the land may be zoned for residential use, meaning that homes can be built on it, or it may be zoned for commercial use, meaning businesses can be located on it. The government typically sets zoning regulations, which can significantly impact a property’s value. Because of this, buyers and sellers need to be familiar with the zoning regulations in the area where they are interested in buying or selling property.

Contracts:

A contract is a legally binding document that outlines the terms of an agreement between two or more parties. In real estate, contracts are often used to purchase or sell property, lease space, or borrow money from lenders. Real estate contracts typically involve a large sum of money. It is important to ensure all terms are clearly stated and agreed upon by all parties before signing.

Otherwise, one party may feel cheated or taken advantage of, which could lead to legal action. For this reason, it is often advisable to have a lawyer review a real estate contract before signing it. Their expertise can help ensure that all terms are fair and clear and that the agreement will hold up in court if necessary.

Title Insurance:

Title insurance protects the holder from financial losses arising from defects in a property’s title. An insurance company issues the policy, which typically lasts for as long as the policyholder owns the property. Lenders generally require title insurance to obtain financing for a real estate transaction. If a problem with the title is discovered, the insurance company will either pay to resolve the issue or compensate the policyholder for any financial losses.

While title insurance is not required in all real estate transactions, it can provide peace of mind and financial protection if problems with the title are discovered.

Inspection:

Inspection is the examination of a real estate property to determine its condition. An inspection can be conducted for various reasons but is most often performed before purchasing a home or during negotiation. The inspection will generally cover the state of the home’s structure, electrical system, plumbing, HVAC, and other major systems. Depending on the findings, the inspection could result in negotiating a lower purchase price or repairs that must be made before the sale is finalized. Ultimately, an inspection provides peace of mind for buyers and sellers by ensuring no hidden surprises with the property.

Buyer’s Agent vs. Listing Agent

When you’re ready to purchase a home, you’ll work with a buyer or a listing agent. As the names imply, a buyer’s agent represents the homebuyer’s interests, while a listing agent works on behalf of the seller. In most cases, the home seller will pay the commission for both the buyer’s age and the listing agents; however, some seller’s agents may negotiate a lower commission with the buyer’s agent to keep more of the sale price for themselves. It’s important to have your representation when buying a home, so be sure to hire a buyer’s agent that you trust.

Fixed Rate vs. Adjustable Rate Mortgages

Choosing a fixed or adjustable-rate mortgage is one of the biggest decisions you’ll make when buying a home. Both have pros and cons, and there’s no clear-cut answer as to which is better. Ultimately, it comes down to your financial situation and what you feel comfortable with.

Fixed-rate mortgages offer the stability of knowing that your monthly payments will stay the same for the life of the loan. This can be helpful if you’re on a tight budget and can’t afford surprises. However, if rates decrease, you may pay more interest over time.

On the other hand, adjustable-rate mortgages start with lower rates than fixed loans. But they can increase – sometimes by a lot after a few years. This makes them riskier but can save you money if rates go up. Again, it all comes down to your circumstances and what you’re comfortable with. Whichever type of mortgage you choose, shop around and compare offers before deciding.

We hope this list of essential real estate terms has been helpful!

Amar Realtor is happy to help you out if you have any questions. Contact me for more information about real estate.