When navigating the real estate market, understanding the key terminology can make the process smoother and less overwhelming. Whether you’re buying your first home, selling property, or investing in real estate, knowing these common terms can empower you to make informed decisions. Below, we break down some of the most important real estate terms that you should know as a buyer or seller.
Appraisal
An appraisal is an assessment of a property’s value conducted by a certified professional appraiser. Lenders often require an appraisal during the mortgage process to ensure the property’s value aligns with the loan amount. If the appraisal comes in lower than the agreed-upon price, the deal may need renegotiation, or the buyer might need to pay the difference.
Closing Costs
Closing costs are the fees and expenses associated with the finalization of a real estate transaction. These costs typically include appraisal fees, title insurance, loan origination fees, attorney fees, and property taxes. Both buyers and sellers may be responsible for paying closing costs, and they generally range from 2% to 5% of the property’s purchase price.
Contingency
A contingency is a condition that must be met before a real estate contract becomes legally binding. Common contingencies include the home inspection, securing financing, or selling an existing home. If a contingency is not satisfied, the buyer or seller can usually back out of the deal without penalty.
Earnest Money
Earnest money is a deposit made by the buyer to show their serious intent to purchase a property. This deposit is typically held in an escrow account and applied toward the buyer’s closing costs. If the buyer backs out of the deal for a reason not covered by a contingency, they may forfeit their earnest money deposit.
Escrow
Escrow is a neutral third party that holds funds and documents on behalf of both the buyer and seller during a real estate transaction. The escrow agent ensures that all terms of the agreement are met before releasing the funds to the seller and transferring the title to the buyer. Escrow also commonly holds funds for property taxes and insurance payments after closing.
Home Inspection
A home inspection is a thorough examination of a property’s condition, conducted by a professional inspector. The inspector assesses the home’s structural components, electrical systems, plumbing, roof, and more. Buyers typically request a home inspection to identify any potential issues before finalizing the purchase.
Listing Agent vs. Buyer’s Agent
A listing agent represents the seller in a real estate transaction and is responsible for marketing the property and negotiating with buyers. A buyer’s agent, on the other hand, represents the buyer’s interests by helping them find suitable properties, negotiating on their behalf, and guiding them through the buying process.
Pre-Approval
Getting pre-approved for a mortgage means a lender has evaluated your financial situation and determined how much they’re willing to lend you for a home purchase. A pre-approval letter can strengthen your offer in a competitive market, as it shows sellers you’re a serious and qualified buyer.
Title Insurance
Title insurance protects buyers and lenders from any disputes over property ownership that could arise after the purchase. This insurance ensures that no other party can claim legal ownership of the property after you’ve bought it.
Under Contract
When a home is “under contract,” it means that the seller has accepted an offer, but the sale has not yet been finalized. The property will remain under contract until all contingencies have been met and the closing process is complete.
Understanding these real estate terms can make the home buying or selling process much clearer and help you feel more confident in your decisions. Whether you’re new to the market or have experience, having this knowledge will undoubtedly work in your favor as you navigate through real estate transactions. For more information or guidance, reach out to Ashe County Realty today!