45 Important Real Estate Terms You Need to Know
If you’re thinking about buying your first home or investing in real estate, it’s best to get acquainted with common real estate terms, even if they make your eyes glaze over. That way, you will know what you’re talking about, whether you’re negotiating on investment properties or homes for sale in Bellevue WA. Here’s a list of the most common real estate terms for your reference.
APR: stands for “Annual Percentage Rate.” This is the interest on a mortgage but it also includes mortgage broker fees, points, and other charges associated with the loan.
ARM: an “Adjustable Rate Mortgage” is one that varies with the market. The interest rate on the loan can change at periodic intervals after a set term.
Amortization: this process combines both principal and interest in every mortgage payment, which allows homeowners to build equity faster.
Appraisal: an appraisal is a document that gives an opinion on the value of a property at a given point in time, used when purchasing or refinancing to make sure the value is commensurate with the loan.
As-Is: this is frequently seen in listings to indicate the seller will not make any repairs or changes to an element of the property. It is then up to the buyer to take care of those items once they purchase the property.
Assessed Value: the value of a property according to the local tax assessor to determine tax rates.
BOM: an abbreviation for “Back on Market,” this means a property is being relisted after being taken off the market for a period of time.
Back-Up Offer: this is an offer that is tendered by a buyer or accepted by a seller when it is possible the first offer on a property may fall through.
Buyer’s Agent: the real estate agent representing the buyer in a transaction and whose duty lies with the buyer.
Carrying Costs: the expense of maintaining a property, such as taxes, utilities, and insurance.
Cash Reserves: the amount of money that a property buyer will have after making a down payment and paying closing costs, typically at least two to three months of mortgage payments, as required by the lender.
Closing: the transaction of transferring a property from one party to another. During a closing, documents are signed, money changes hands, and the deed to the property is transferred to the new owner.
Closing Costs: this is a percentage of the purchase price for a property and does not include the down payment. Title insurance and loan processing costs are included in closing costs, which are sometimes rolled into a mortgage loan.
Commission: a fee paid to a real estate broker, often a percentage of the selling price, in return for their services. The seller usually pays a commission to the listing agent’s broker, who then shares that fee with the buyer’s side.
Common Area: an area that is for use by all tenants, such as a shared yard in a condominium community. This often replaces “lot size” in real estate listings, since the property in question does not have its own lot.
Comparative Market Analysis: this is a study of other comparable properties in the area that have recently been listed or sold to estimate a listing price.
Contingency: provisions that must be satisfied before a contract can be executed, such as the home passing inspection or the buyer being able to close by a certain date.
Counteroffer:a response to an offer or bid on a property. For example, a prospective buyer may offer a low price on a home, and the seller may come back with a counteroffer in between the buyer’s offer and the asking price.
Credit Score: a score assigned to an individual by one of the three credit bureaus based on the elements of their credit report and used by lenders to determine loan qualification.
Deed: a legal document that gives the holder property ownership rights.
Disclosures: important information or property defects that must be disclosed by a seller when listing a property, such as a history of property line disputes.
Down Payment: cash put toward a real estate purchase by the buyer.
Dual Agency: when an agent represents both the buyer and the seller in a transaction.
Equity: how much of a property the owner actually owns, based on how much of the loan principal has been paid off. It can be calculated as the market value of the home less the amount still left to be paid on the mortgage.
Escrow: a third party that takes payments, whether during a real estate closing or for mortgage insurance and tax payments until they are due.
Exclusions: elements, such as an appliance, that are not included in the sale of a property.
Fixed Rate Mortgage: a mortgage loan where the interest rate remains the same for the loan’s duration.
Hazard Insurance: part of a homeowner's insurance policy that covers hazards to the structure of the home, such as fire, wind, and hail.
Inspection: paid for by the buyer, an evaluation of a property by a professional to determine the soundness of a structure and that everything is up to code and in good working order so the buyer isn’t surprised by unexpected faults or repairs later.
Listing Agent: the real estate agent who represents a property seller.
MLS: short for “Multiple Listing Service,” an aggregator of available properties for brokers.
Mortgage Broker: a third party who can help a buyer find a mortgage and who often has access to lenders unbeknownst to the buyer.
Offer: AKA “offer to purchase,” a bid and related terms made by a buyer to a seller.
Pre-Approval: a tentative approval by a mortgage lender based on the applicant’s qualifications for a loan.
Pre-Qualification: a dry run of the pre-approval process with no lender verification involved.
Private Mortgage Insurance: often known as “PMI," insurance paid by a mortgage holder, usually for high loan-to-value mortgages, in case the holder defaults on the loan.
Real Estate Agent: a person licensed by the state to conduct real estate transactions for buyers and sellers, under the auspices of a real estate broker.
Real Estate Broker: a step above a real estate agent and with a special license and usually more training. Brokers may work independently or manage other agents. Typically, brokers run their own business, and agents work for them. A broker associate is a broker who works for a larger brokerage firm, like a chain. When looking for top real estate agents Bellevue WA house hunters can trust, it’s wise to search for “brokers” as well.
Realtor: usually written REALTOR®, a member of the National Association of Realtors.
TOM: short for “Temporarily Off Market,” usually because the seller is indisposed or the property is undergoing repairs.
Title Insurance: insurance that says the property title is free and clear, without liens, such as past-due taxes.
Title Report: a report on the legal history of a property, particularly any liens against it.
Under Contract: also known as “pending,” this means there has been an accepted offer on a property.
Walk-Through: a final check of a property by the buyer before closing to ensure it’s in the same condition as when the offer was tendered.
Zoning: laws that dictate how a property can be used, such as for residence, business, industrial use, and the like.
You’ll probably learn other real estate terms along the road to finding your perfect property, but the words and phrases above should get you started. When you can talk to professionals in their own vernacular, they’ll know you’re serious about your quest and you’ll understand the process that much better.