45 Real Estate Terms For Home Sellers
When it comes to real estate, know the lingo.
When you’re selling your house, you will have no choice but to be inundated with a bunch of unfamiliar real estate vocabulary. And since most homeowners will experience the sale of their house only once to a few times in their lives, it is understandable that the average seller would not know many of the real estate terms used by agents, lenders, and lawyers. While this glossary isn’t exhaustive, this extensive list of real estate terminology is designed to assist current home sellers who are looking to get informed.
Real estate terms
This is when you pay scheduled mortgage payments in order to incrementally reduce the amount of mortgage loan debt. On an amortized loan, the amount paid on interest will decrease over time, and the principal payment will increase. That is because the interest is paid off first, then the principal.
An appraisal is requested by the buyer’s mortgage lender, and it is the estimated value of a property. An appraisal determines whether the home is worth the amount of the requested loan. A homeowner could also have an appraisal done to get an idea of the current value of the house for insurance purposes or to show a potential buyer that it's priced correctly.
As your home ages, its value should increase due to larger forces of inflation. This increase in the value of your home is known as appreciation.
When a property is sold “as is,” it is sold in the condition it is in at the time of listing and selling. This means that the seller is stating they will not be making any repairs or renovations on the property. Most of the time properties that are sold “as is” are sold at values lower than market prices for similar homes in the area. To be sold “as is,” the condition of the home should not change before time of sale.
A buyer’s market occurs when there is an influx of houses for sale and a low number of buyers. Because of this imbalance of supply and demand, a buyer’s market can force sellers to lower prices and be open to offering concessions.
Cash home buyer
Cash home buyers are property buyers that offer to buy properties for cash. They do not require assistance from mortgage lenders or other financing institutions.
Closing occurs when the sale of the home is considered final. This includes signatures from all parties on the required documents, exchange of payment, and lender approval when it is required. In some areas, recording the deed with the county clerk’s office is the final step for closing on a sale. After closing, the buyer is considered the new homeowner.
Normally paid at the time of closing a real estate transaction, closing costs are a grouping of charges from real estate agents, insurance companies, attorneys, the title company, the lender, any taxing authorities, and other closing settlement-related companies. There are separate closing costs for both buyers and sellers.
Real estate commissions, which include the buyer’s and seller’s agent fees, are typically 5%–6% of the home’s sale price in total. It is often the seller that pays for both buyer and seller agent commissions.
Comparable sales (COMPS)
Comparable sales refer to the prices of homes recently sold that have similar characteristics to the seller’s property. These are used as a reference to set the sale price of a property.
Comparative market analysis (CMA)
To determine the value of a home in order to sell, a comparative market analysis is performed, where the data of sales prices of similar properties in the area are collected and used to set an appropriate asking price.
A contingency is a clause that states a certain condition that is required for a real estate contract to be finalized. Examples of contingency conditions include a home inspection, mortgage approval, appraisal, and title search. If a contingency is not met, the buyer is allowed to back out of the sale.
This term refers to the physical appearance and attractiveness of a property’s exterior.
Days on market (DOM)
This is the number of days it takes for a seller to sign the contract for the sale of the house from the initial day of listing. The DOM is calculated and referenced to predict how the local market is doing. A low average DOM means that there is high demand, while a high average DOM indicates a slow selling season.
Also known as a property deed or a house deed, this is a legal record of the ownership of a property. The deed documents the owner of the property, as well as identifies the seller and the buyer. In order to sell a property, the seller must sign this document for the property to legally change hands.
If a homeowner has missed a payment on their loan, the lender could consider the terms of the loan unmet, and that the homeowner has no desire to pay. Now they are in default, which is the first step toward foreclosure.
When a homeowner misses a scheduled payment for over 30 days, they are in a state of delinquency, and a lender may choose to begin the foreclosure process by declaring the homeowner in a state of default. This usually happens when there have been no payments made for 90 days or more.
This is a lump sum that the buyer pays toward the property, with the rest of the amount commonly financed by mortgage lenders. Most down payments are around 20% of the home’s purchase price.
A period of due diligence, which will be defined in the house’s purchase agreement, is a frame of time in which the buyer has the opportunity to have the property inspected by professionals. Depending on the outcome of the inspection, a buyer may take the opportunity to renegotiate or even terminate the sale contract during the period of due diligence.
Earnest money deposit
An earnet money deposit is a sum of money that an interested buyer offers as an official gesture of interest in purchase. The earnest money deposit made by a buyer will count toward the down payment of the house and, unless covered by contingencies, is not refundable if the buyer decides to back out.
Equity is the investment that the homeowner (the seller) has in their property. Equity is calculated by subtracting any mortgages and/or liens against the property from the market value of the house. This can be illustrated as such: Market Value – (Mortgages + Liens) = Equity. When you buy a home for less than it is worth, you gain instant equity equal to the difference between what you paid and the value. Equity can also be thought of as the profit you can assume to receive in the potential future sale of your house. It can also be used as collateral to obtain loans or pay off higher-interest debts.
Escrow occurs when a neutral third party (not the buyer or seller, usually a title company) holds collateral until closing. More often than not, the buyer’s earnest money deposit is used as collateral. When the sale is complete, escrow will be provided to the seller.
The escrow holder is the agent or impartial third party that collects the money or personal properties to be held as collateral until specified events occur during the process of a property sale.
Fair market value
The fair market value, also known as market value, is the hypothetical price a buyer is willing to pay for a home in an open market. Unlike market value, the fair market value of a home does not consider any current fluctuations in the market. This value is used as a base to set a selling price.
When a homeowner misses a mortgage payment for an extended period of time (typically 3 months), the homeowner is in jeopardy of forfeiture of all property rights in a legal process known as foreclosure. Foreclosure will take place if the homeowner fails to pay the outstanding debt and cannot sell the property in a short sale, and the property will be auctioned off. In the event that there is no sale during the foreclosure auction, the lender will take ownership of the property.
For sale by owner
Also known as FSBO, houses that are sold this way are being listed without a real estate agent and are being sold directly by the owner. When selling FSBO, the seller avoids paying commission fees to real estate agents. However, the seller assumes responsibility for listing, marketing, and facilitating the closing process in the sale of their house.
This is coverage that protects a residential property and the articles by a promise of reimbursement in events of damage and destruction. Insurance protects the owner of the policy from liability in the case that a visitor to the home is injured.
Home sale contingency
A home sale contingency is used by a buyer to state that the purchase of the seller’s property is contingent upon the buyer’s ability to close on their own property. This is often added to the contract of the sale.
An inspection, which occurs when a buyer orders a professional inspector to visit the property, is required to report on the condition of the house and includes any repairs or renovations that may be needed. Most lenders require this to make sure the loan is viable. An inspection usually happens during the due diligence period.
In real estate, a lender is an individual, private group, or financial institution that provides funds to a buyer for the purchase of a property, with the expectation that the loan is paid back with interest, in no uncertain terms, by a specified date.
A mortgage is a long-term loan that is provided by a lender or lending institution to finance the purchase of a property. The property that is bought is the collateral for the loan.
Multiple Listing Service (MLS)
An MLS is a database of properties for sale in a given area and is accessible to real estate agents and broker members. Agents often use the MLS to compare similar properties and set prices.
This occurs when potential buyers are allowed to view a home within a designated timeframe, without setting up an appointment.
The principal is the full amount that a buyer borrows from a lender. Buyers will pay off the principal plus interest, usually in monthly installments.
This is a legal notice about an unpaid debt on a property. It indicates that legal action will be taken against the lender to recover the owed debt.
Real estate agent
This is an individual who has a professional license to negotiate and coordinate real estate transactions. There are buyer’s agents and listing agents for sellers.
Real estate broker
Real estate brokers have undergone additional training and licensing that gives them legal authority to conduct real estate transactions. These individuals are the ones who draw up contracts and review them for legal compliance.
This is the legal contract where, under specific terms and conditions, the seller agrees on their intent to sell, and the buyer agrees on their intent to buy. A sales agreement is also called an agreement of sale, a contract of purchase, or a purchase agreement.
Concessions offered by sellers are used to incentivize buyers to purchase a home. The most common example of an offered seller concession is contributing to the payment of the buyer’s closing costs.
A seller’s disclosure includes any information from the seller about the property that may affect the buyer’s decision to purchase. A disclosure statement includes the history of the property itself and the surrounding area.
A seller’s market occurs when there are more buyers than available homes for sale. Because there is more demand than supply, a seller’s market creates an opportunity for sellers to raise their prices.
This happens when a homeowner sells their house for less than what it is worth and what is potentially owed on their mortgage. A short sale lets the mortgage lender recoup some of the outstanding loan balance that is owed to them, but only after being approved by the lender.
Staging a house involves cleaning and preparing the property to show to potential buyers. This can include using professional cleaning services, redecorating to remove personal items and décor, and using professional photography services to market the house.
Title insurance is coverage for buyers and any lenders against any potential future issues with a property’s deed once there is a transfer of ownership.
A title search is a search of public records for the history of the property, usually performed by a title examiner. This history will include taxation, liens, sales, and purchases, among other important information.
Selling your house can be an intimidating experience, but it doesn't have to be. When you understand real estate terms and definitions, you can navigate the process confidently. We Buy Ugly Houses® is here to make the process even simpler. Our local property buyers are trained professionals who work quickly and expertly to ensure a smooth sale from offer to closing. All that's needed is our 3-step process: free consultation, fair offer, fast close—done! We have experts ready and waiting to answer any questions you might have, so don't hesitate to reach out today!