It goes without saying that buying or selling a home can be stressful. It can be even more stressful if you feel like your real estate agent is speaking Greek to you! Via MLS.com, we’ve complied what we think are some of the most common terms that agent use during a real estate transaction. Becoming familiar with these terms before you speak with your agent can reduce both stress, and the possibility of miscommunication.
Keep in mind, there are also financial terms (not covered in this article) to learn to help communication with your lender. Some of those terms can also be found on the MLS.com website.
Terms To Be Familiar With
Acceptance – The time at which an offer to purchase is accepted. The fact that it was accepted must be relayed to the person that made an offer in order for all parties to be bound to the contract.
Appraisal – A professional determination of value. Mortgage companies usually require an appraisal of the property by a licensed, disinterested party before agreeing to loan money on the property. Methods of determining value may be based on many things, such as comparable sales in the area, the cost approach, the income approach, or the highest and best use of the property.
Closing – The transaction where title passes from seller to buyer and the seller is paid. A settlement statement shows all costs incurred and gained by both parties.
Closing Costs – The expenses incurred in obtaining the property and transferring title to the new owner. This may include, but is not limited to attorney’s fees, points, title charges, credit report fee, document preparation fee, mortgage insurance premium, inspections, survey, appraisals, prepayments for property taxes, deed recording fee, and homeowners insurance.
Counteroffer – If the receiver of an offer makes any changes to the original offer, it is considered a rejection of the initial offer and becomes a counteroffer.
Earnest Money (also called Deposit) – Funds given by the buyer and held in an escrow account until the real estate closing. In some cases, these funds are refundable if the loan fails to close, but if the loan does close, the purchaser is given credit at closing for the earnest money.
Escrow – A neutral third party holds other people’s funds in a secure account for future use. An earnest money deposit is held in a real estate broker’s escrow account. It is the broker’s account, but he is holding the buyer’s funds in the account for safekeeping until closing. In the case of a mortgage, the total monthly mortgage payment may include funds to pay for future taxes and insurance paid in addition to the principal and interest. This escrow is held by the lender until taxes and insurance are due, at which time the mortgage company pays the taxes and insurance on the borrower’s behalf. After the taxes and insurance are paid, the lender may re-adjust the total monthly payment to insure sufficient funds for future escrowed items.
Home Inspection – An inspection made by a third party (not the buyer or seller) for a statement of condition on the property, i.e. structural and mechanical conditions. Many contracts to purchase are contingent on the buyer having a home inspection performed within a certain time period prior to closing.
Listing/ Listing Agreement – A written agreement between a property owner and a broker authorizing the broker to advertise the property and find a buyer or a tenant for a specific property. ( See Listing Contract).
Offer – When a buyer makes a written promise to purchase real estate, it is an offer. It does not become a contract until all terms are accepted by both seller and buyer.
Pre-qualification – Having a mortgage lender advise that debt ratios and credit report plus other factors show a borrower qualifies for a particular loan amount before signing a contract.
Purchase and Sale Agreement – The contract between the buyer and seller stating terms, conditions, sales price and other pertinent information about the property being purchased.
Title Company -The company that, for a fee, checks and insures the title against liens, ownership claims, and title problems.
Preston Group is here to guide our clients through the process of completing a real estate transaction. We have over 10 years experience in the Las Vegas real estate market, and do a majority of our business through referral and return business. We also happily accept commercial real estate referrals from other local real estate agents.
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I appreciated your list of terminology that I ought to get familiar with. I’m looking at buying a home, so this article will definitely help me. I’ll heard of pre-qualification before, but I wasn’t sure what it was. I’ll definitely do this though so I can be prepared to make some offers on homes with my real estate agent.