Feel like everybody’s speaking a different language when it comes to real estate? Get into the conversation and get comfortable understanding what’s being said. This short glossary helps buyers and sellers navigate industry terms.
Appraisal – the determination of the worth of something by a professional, in this case the market value of a property. An appraiser uses an analysis of local market data along with the characteristics of the property. Your bank or other lender may refuse to loan you money if the appraisal price is lower than the loan request.
Closing costs – the entire package of miscellaneous expenses paid by the buyer and the seller when the real estate deal closes. These costs include the brokerage commission, mortgage-related fees, escrow or attorney’s settlement charges, transfer taxes, recording fees, title insurance and so on. Closing costs are generally paid through escrow. Jump ahead if you’re lost after “escrow.”
Contingency – conditions that have been built in to a real estate purchase or sale agreement must be met before the sale can be completed and legally binding. For example, a buyer’s contractual right to obtain a professional home inspection before purchasing the home.
Disclosures – The seller is required to provide the buyer with certain information (disclosures). The number and types of disclosures vary by region, but they may include information about conditions affecting the value or enjoyment of the property. The seller may know of an earth-shaking construction project that is about the start around the corner, which would impact the enjoyment of the property.
Escrow – Funds, securities or other assets held by a neutral third party (an escrow company or agent) on behalf of the other two parties (in this case the buyer and the seller). The buyer will deposit the payment in an escrow account, proving to the seller that he or she will be able to uphold the other end of the deal. The escrow service will pay the funds to the seller once certain conditions pertaining to the sale have been met.
MLS – Multiple Listing Service. An MLS is an organization that collects, compiles and distributes information about homes listed for sale by its members, who are real estate brokers. All properties for sale are assigned an MLS number.
Mortgage – A loan that helps you purchase your house. You sign a contract promising to pay back the loan with interest over a certain number of years. The components of your monthly mortgage payments may be referred to as PITI: principal (the money that goes into paying down the loan), interest (which is paid to the lender for letting you borrow the money), (property) taxes and (homeowner’s) insurance.