Common Real Estate Terms You Should Know from The Kittleman Group
Ready to immerse yourself in a new “language”? If you have a basic understanding of important real estate lingo and concepts BEFORE you start the process, you’ll be equipped with knowledge to help keep you on track of important steps and boost your confidence during your real estate transaction.
A familiarity with these terms also makes communication with a real estate agent easy. The Kittleman Group is fluent in this language, so give us a call at (301) 785-5889 or e-mail us if we can help answer any questions for you.
Appraisal — This is the value of a property determined by a qualified appraiser. Lenders require an appraisal of a property before they will provide the mortgage loan to the buyer.
Tip to Save Money: If the appraised value is less than the offer you are making on the home, there is a chance you may not be approved for a loan. Banks don’t want to invest in homes that are overpriced. (You don’t either!) Before selling, or making an offer, ask us to do a comparative market analysis for you. This analysis will tell you what comparable homes have sold for in the area.
Appreciation — This is the amount of increased value of a property over a specific period of time.
Buyer’s Agent — This is the Realtor® who represents you when you purchase a home.
Tip to Save Money: When you buy a home, you don’t pay your real estate agent—the home seller pays their commission.
Closing — This is the scheduled day that the seller completes the transaction with the buyer. The sale of the property is officially finalized on this day and the buyer signs all the mortgage documents and pays the closing costs.
Closing Costs — These are all of the costs that must be made by the closing date and costs associated with the final sale of the property. Typical closing costs include agent fees, origination fees, lawyer fees, title insurance fees, survey fees and taxes.
Tip to Save Money: Be sure to ask the lender about every service fee included in the Good Faith Estimate. Then, shop around for a better price or negotiate them down. This may include homeowner’s insurance, settlement fees, underwriting and wire transfers.
Contingency — This is a condition that is required to be met before the contract between the seller and the buyer becomes legally binding. A common example of a contingency is the home inspection. For example, if the home inspection reveals major issues, the contingency allows the buyer to nullify the contract without losing money.
Tip to Save Money: If you find yourself in a bidding war on a home, shortening contingency periods could help. You may not necessarily have to pay more money, but offer flexibility.
Depreciation — This is the amount of decreased value of a property over a specific period of time.
Down Payment — This is the amount of money, out of pocket, that the buyer pays toward a property to the lender that provides the mortgage loan that covers the remainder of the property’s price. The down payment amount will vary based on several factors including the type of mortgage the buyer takes out with the lender. A down payment could be anywhere from 3 percent of the property’s total cost to 20 percent of the total cost.
Earnest Money Deposit — This is the deposit money that a buyer provides with an offer on a house as a show of good faith. An escrow agent then holds the money deposit until the sale goes through, and if the sale proceeds the money will go to the down payment. If the seller does not accept the offer, the money is returned to the buyer.
Escrow — This is a deposit of money or documents (including the earnest money deposit) that a neutral third party holds until the sale is finalized.
Fixed Rate vs. Adjustable Rate Mortgages – These are descriptive terms for the type of mortgage loan. A fixed-rate mortgage has a pre-determined interest rate that remains throughout the entire life of the loan. The most common fixed rate is for 30 years. An adjustable rate mortgage is one that has a variable interest rate. The most common duration for these loans are 5, 7 or 10 years.
Tip to Save Money: There is less risk involved if you choose a fixed rate loan if you plan to own your home for more than 5 years. If you plan to resell or refinance your home before the introductory period ends, it may make financial sense to choose the adjustable rate. For either option it is important to shop around for the best rate and entertain recommendations from a real estate agent, family and friends.
Inspection – An inspection investigates every aspect of the home for potential issues. It should take place after you’ve made an offer on a home and costs vary per market. The inspector reviews the entire home including plumbing, electrical, foundation, appliances, heating, walls.
Tip for Saving Money: If the inspector finds something wrong, you may be able to negotiate a reduced price for the home. Ask your Realtor® for a reputable/good inspector. The inspector should review every nook and cranny of the home. This is an important step as you may be stuck with expensive repairs after you purchase the home if they miss something.
Listings — This is the term real estate agents use to refer to homes that are for sale. You can find listings online and via mobile phone apps. Listings include basic info about the home that is for sale, including price, the square footage, number of bedrooms, etc.
Listing Agent – This is the Realtor® that represents you when you sell a property.
Mortgage Pre-Approval Letter — This is a letter from a bank with an estimate of the amount of money they will lend you. Buyers can use the mortgage pre-approval letter to show sellers that they will be able to get a loan when needed. It is a good tool to get a leg up on the competition for a property.
Tip for Saving Money: If you end up competing with other offers for a home, securing a local lender may help. Listing agents prefer to deal with local lenders because those lenders want continued referrals and care about their reputation. Be sure to ask the bank about closing costs, fees, what is included with fees you pay, and if your loan will be locked into a specific interest rate. It is important to be clear about what the bank offers to you.
Multiple Listing Service — This is an extensive database that real estate agents have access to use. It offers detailed information about the majority of properties currently on the market.
Offers and Contracts – With the help of an agent and an attorney, you will make an offer when you’ve found a property you like. It is a good idea to submit a personalized cover letter with an offer explaining to the seller why you want to purchase the home. Sellers may counter an offer with the hope of getting more money or a faster timeline for closing the transaction. If so, negotiations begin.
Tip for Saving Money: The key to winning negotiations is to have an experienced Realtor® on your side of the table. Conduct extensive research as you select an agent to determine the number of deals they have done in your area, and read online reviews of their service. An agent that possesses the Certified Negotiation Expert (CNE) credential has proactively completed extensive hours of negotiation training for the appropriate negotiation skills to best serve your financial interests.
Realtor® — This is a distinctive credential given to real estate agents that are members of the National Association of Realtors® (NAR). The difference is meaningful! The NAR code obligates Realtors® to follow a specific code of ethics and standards of practice to all parties involved in a real estate transaction. Realtors® promise never to mislead or withhold information.
Title Insurance — This is insurance to help protect both the buyer and the lender against any losses that occur due to a dispute over the property’s ownership. Most mortgage lenders require the buyer to pay for this insurance as part of the closing costs.
Tip to Save Money: Shop around to find the best rates for title insurance. Your Realtor should have established relationships and be able to recommend a good title insurance company. It may be possible to negotiate some of the fees the insurance provider charges.
Did we miss any terms that you would like defined? Give us a call to discuss at (301) 785-5889, or send it in the comments section and we’ll respond back to you. Thanks!
Laura and Lisa Kittleman, REALTORS®