Buying or selling a home? Welcome to the world of open houses, offers, and, yes, a whole lot of real estate terms that might sound like a foreign language.
Most homeowners encounter unfamiliar terms in real estate, such as “escrow” and “contingency,” at some point. Time is fast in real estate transactions; thus, becoming familiar with these fundamental terms equips you to make decisions comfortably and wisely.
In this post, we’ll break down 11 must-know real estate terms that every buyer and seller should understand. We’ll share basic yet practical information in a light manner, as if you are chatting with a friend.
1. MLS (Multiple Listing Service)
MLS is all about a big internet platform containing listings of all available properties. Real estate agents use this system to publish properties available for sale, while property seekers use it to browse homes.
Most residential listings you discover on Zillow and Realtor.com originate from MLS publishing. Marketing a house for sale begins with this as the vital first step.
2. Appraisal
It is the official value assessment of homes conducted by professionals. Lenders usually require it. The appraisal validates that the home’s price matches the payment you plan to offer for purchase.
Sometimes homebuyers had to renegotiate purchase prices after appraisals show decreased property value.
3. Escrow
The escrow works as an independent, protected space for secure and temporary storage. It is where money and documents are safely held until the fulfillment of contract requirements. A third-party organization serves as the manager of this account since neither the buyer nor the seller has any control over it.
Money only gets released when the negotiations are successful, leading to the contract’s completion.
4. Contingency
This means the deal can proceed only if all necessary conditions, called contingencies, are fulfilled. The principal elements of contingency in real estate transactions are financing, inspection, and appraisal requirements.
A built-in safety mechanism, it serves as an assurance for all parties. A buyer may terminate the agreement without consequences if any contractual conditions or contingencies are not fulfilled during the transaction.
5. Closing Costs
Once a transaction is complete, homebuyers must pay these costs with the purchase price. The purchase price is the sum of various fees, including loan origination costs, insurance premiums, and different taxes.
The average expenses people pay during closing amount to between 2% and 5% of the total cost of the property, according to Bankrate. For instance, owners of $300,000 properties will spend between $6,000 and $15,000 for closing costs.
6. Earnest Money
The earnest money normally represents 1–10% of the proposed offer amount and will later support the down payment and closing costs. It shows the buyer’s genuine intent in the property, and the seller also takes it as a guarantee that the property will eventually be sold. The seller also retains the right to withhold the earnest money if the deal doesn’t go through without a valid reason. So, it benefits both parties.
7. Pre-Approval
A pre-approval shows that lenders examined your financial situation and determined their limits for providing a loan.
This instrument provides buyers with real competitive power to make strong offers. Sellers also recognize pre-approved candidates as they consider them serious and capable.
8. Title Insurance
The insurance cover protects buyers and lenders by ensuring they escape legal risks associated with property ownership, such as past tax liabilities or former ownership claims. It is a one-time payment processed at closing and is worth it for its benefits.
9. Home Inspection
Inspecting a house means a thorough evaluation of its components. A licensed home inspector conducts general checks that start with roofing systems and end with foundations while producing a detailed document called a home inspection report.
Due to its obvious benefits, 4 out of 5 homes sold in the country get an inspection.
10. Down Payment
It is the part of the money the buyer pays the seller to finalize the deal. Traditional down payments are 20%, but many buyers pay only 3–5%, depending on the loan program they select or the understanding they have with the seller.
11. Seller’s Disclosure
The seller must provide this document describing the house’s existing issues, such as roof leaks or outdated plumbing systems.
Many states require the seller to provide a disclosure document to buyers. It helps buyers make better buying decisions. Always read it carefully!
Why These Real Estate Terms Matter
Understanding these real estate terms isn’t just about sounding smart (although, hey, that’s a bonus). People need protection for their investments and want to avoid surprises during the buying and selling process.
Negotiating becomes difficult when you do not understand what “contingency” signifies. Skipping the home inspection turns out to be a mistake since it is required, but you assumed it was optional. If only you had known better.
Final Thoughts
Whether buying your first home or selling one you’ve loved for years, these must-know real estate terms help you speak the language of real estate like a pro.
Knowledge builds your readiness when it comes to handling offers and contracts alongside all additional business aspects. Real estate is more than residential properties because it requires thoughts about choices. Big ones.
When confronted with jargon such as “escrow” or “title insurance,” you will respond with assurance because, thanks to this information, your knowledge base has expanded.
Before finalizing any agreement, you must confirm that your new house stands strong upon internal inspection and examination.
At Elite Inspections, we provide complete, professional, and unbiased inspections that guide real estate buyers and sellers toward making confident decisions. Our qualified inspectors conduct a comprehensive inspection from all angles and deliver objective reports for your consideration.
Book your inspection through Elite Inspections to guarantee you progress confidently.
