The real estate industry is known for its use of specialized terminology that is often unfamiliar to people outside of the industry. As a result, most individuals lack a comprehensive understanding of the language used in real estate. Moreover, some real estate terms and phrases may sound similar to commonly used words and expressions, but their meanings can differ significantly.
This lack of familiarity with the vocabulary used in real estate can lead to confusion and misunderstandings for those not well-versed in the industry. Therefore, it is essential to learn and understand the unique terms and phrases used in real estate to ensure effective communication and successful transactions.
Here are some important real estate terms that you should know to help you navigate the world of buying, selling, and owning property:
1. Acre: A land measuring unit that is comparable to about 4840 square yards or 4047 square meters.
2. Addendum: If a buyer or seller wants to modify an existing contract, they may do so by adding an addendum that specifies the particular clause(s) they wish to alter and the terms of the modification. Regardless of the addendum, the remainder of the agreement remains the same.
3. Amortization: A method of repaying debt in a series of equal payments over the course of the loan, with changing amounts going toward principal and interest.
4. Appraisal: An appraisal is an assessment of the value of a property. It is typically done by a professional appraiser and takes into account factors such as location, condition, and comparable sales.
5. As-is: the seller will not fix any defects or problems with the house once the property is being sold.
6. Borrower: The person who is not capable of paying the amount of the purchase, therefore resulting in lending some money from banks and other lenders.
7. Blind Offer: A purchase contract that a potential buyer drafts without ever visiting the property.
8. Bridge Loan: A temporary loan taken out by a person or business until permanent financing can be obtained or a debt is settled.
9. Brokerage: The element of the real estate sector that encompasses actions related to property management or a real estate sale, exchange, purchase, or lease.
10. Buydown: Reducing the interest rate on a mortgage for a certain length of time, usually the first few years of the loan, by paying an upfront fee.
11. Chain of Title: The order in which title to a property has historically been transferred, starting with the present owner and ending with the original owner. This likewise holds for a property without a house on it.
12. Clear Title: Helps to prove that an owner has the right to sell the property, by determining first whether there are any unpaid financial obligations associated with the property.
13. Closing: The closing is the final step in a real estate transaction when ownership of the property is transferred from the seller to the buyer. It typically involves signing a lot of paperwork and paying closing costs, which can include things like title fees, taxes, and loan fees.
14. Co-borrower: A second borrower whose name is on the loan documentation and whose credit history and income are taken into account for determining eligibility.
15. Commission: A traditional payment made to real estate agents for their services to home purchasers and sellers that was derived from a percentage of the final transaction price.
16. Deed: A legal document that declares a person to be the owner of a piece of property or other asset.
17. Delinquency: An owner who misses a mortgage payment will be charged a 10% penalty and, in the event of a second installment, a one-time administrative fee.
18. Down Payment: The money up advance paid by the buyer for significant transactions like real estate.
19. Equity: Equity is the difference between the value of a property and the amount of debt that is owed on it. For example, if a property is worth $300,000 and there is a $200,000 mortgage on it, the equity would be $100,000.
20. Escrow: Hold-back: Practice of collecting additional monies at closing that will be reimbursed when necessary repairs have been performed to the bought property.
21. Exclusive Listing: Way of selling property by dealing only with one real estate agent directly. You consent to letting a single real estate agent try to identify purchasers and handle the selling process rather than making your house openly available for sale.
22. Foreclosed: Legal procedure by which a lender tries to regain their money by seizing control of the mortgaged property and selling it.
23. Furnishing: the degree to which a home or apartment has been developed, ranging from bare to fully furnished.
24. Grace Period: The time frame between the completion of a billing cycle and the due date for payment.
25. Home Inspection: A home inspection is a thorough examination of a property to identify any issues that need to be addressed before a sale is finalized. It is typically done by a professional inspector and can cover everything from the foundation to the roof.
26. House for Assume Balance: An act where a new buyer will shoulder the responsibility of paying the loan balance of the previous owner of the house or unit. It is a beneficial strategy for the seller to be free from his/her loan and debt concerning the property.
27. Jumbo Loan: Financing that exceeds the restrictions specified by the Federal Housing Finance Agency (FHFA).
28. Lead: These are the individuals that are looking at real estate and could be interested in hearing about your proposal and they can also be called as future clients.
29. Lease Option: A contract wherein the owner and the tenant agreed that, after a certain time period, the renter may purchase the property for a certain sum.
30. Lender: Someone who lends money to another individual so they can purchase something. In terms of real estate, the bank may be referred to as the lender to clients interested in purchasing property.
31. Listing: A listing is a property that is for sale and has been listed with a real estate agent or broker.
32. Mortgage: A mortgage is a loan that is used to buy a property. The loan is secured by the property, which means that if the borrower fails to make payments, the lender can foreclose on the property.
33. Pending: The buyer is almost ready to close on the property because the conditions precedent have already been satisfied.
34. Pre-approval: A pre-approval is a preliminary approval for a mortgage loan. It is based on a lender's assessment of a borrower's creditworthiness and income, and can help a borrower know how much they can afford to spend on a property.
35. Pre-qualification: A collection of your basic financial information done by a mortgage lender so that you can determine how much and what type of property you can actually afford.
36. Principal: The amount of money owed on that loan. It is also the sum of money given to a borrower or invested.
37. Probate Sale: An act where the court is involved in selling a house or property when a person suddenly passes away without leaving any will behind of who’s going to acquire his/her property when he dies..
38. Ready-For-Occupancy (RFO): A type of property that is ideal for individuals or families looking for a quick transaction between the sellers and them. These properties are already available for being occupied anytime.
39. Real Estate Agent: Also referred to as a real estate salesperson, whose purpose it is to help customers buy or sell a range of properties, including lands and buildings.
40. Real Estate Broker: A person who obtained a license in selling properties and can work independently. They are also paid through commission and can build their own brokerage then hire their own real estate agents.
41. Real Estate Owned: A property that was owned by a bank and was not sold at the foreclosure auction. This happens when the previous owner was not able to pay the debt/loan owed to the lender.
42. Seller’s Disclosure: A legal requirement that mandates sellers to disclose information about the property's condition that can be adverse to potential buyers.
43. Short Sale: A situation in which a mortgage lender consents to accept a mortgage amount that is lower than what the borrower owes in order to expedite the sale of the property by a financially troubled owner.
44. Title: The title is the legal document that proves ownership of a property. It shows any liens or encumbrances on the property and is typically researched by a title company before a sale is finalized.
45. Transfer of Ownership: A person's established right to real property may be transferred to another person by a sale, gift, or inheritance through a legal process.
46. Transfer Tax: Tax levied at a maximum rate of 50% of 1 percent of the value of real estate that is applied to any form of transferring ownership or title, including sales, bartering, and other exchanges.
47. Trust Sale: An act that allows property owners to determine who will get their estate once they pass away. Additionally, the owner can designate the trust to provide the beneficiaries access to the proceeds over a predetermined length of time.
48. Under Contract: When a seller accepts a buyer's offer to buy their house. However, until all conditions (if any) associated with the property are satisfied, the house isn't officially deemed sold.
49. Underwriting: In order to give final approval for your loan, your lender confirms the specifics of your debt, income, assets, and property.
50. Zoning: Zoning is the regulation of land use by a local government. It determines what types of buildings can be built in certain areas and can impact the value of a property.
If you’re new to these terms and are currently negotiating, whether as a buyer or a seller, you may always look up unfamiliar terminology here. Figuring out these words will improve your understanding of these words. As a buyer, you will gain an understanding of the processes as well as the ordeals in this industry which will help you decide especially on your commitments in buying a property, check out pre selling and ready for occupancy units click here.
If you’re a property seller, learning this will make it easier for you to explain and interact with your customer, which will increase your credibility. This will also help you in your selling process. If you want to gain more property exposure, upload your listing for free click here.
By reading these blogs and articles regularly, you can gain a deeper understanding of the industry, including the latest changes in real estate laws and regulations, the most popular locations for buyers and renters, the types of properties that are in demand, and the best strategies for investing in real estate.
So whichever role you have in the real estate business, it is important to learn every aspect of the field so that you won’t panic and be mystified by the words/phrases you hear when interacting with a real estate professional. Finally, reading and analyzing these words will enable you to broaden your communication skills and can assist you to grasp knowledge about the property that you are going to invest or sell in the future to avoid fatal mistakes that can risk your money, time and resources.