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Real Estate Terms Decoded

Buying or selling a home shouldn't feel like learning a foreign language. This guide breaks down the real estate terms you'll actually encounter, so you can confidently navigate conversations with agents, understand contracts, and make informed decisions.

Buying & Selling Basics

Closing

The final step in a real estate transaction where ownership officially transfers from seller to buyer. You'll sign paperwork, get your keys, and officially become a homeowner. Also called "settlement."

Escrow

A neutral third party that holds money and documents during a real estate transaction. Think of it as a secure middleman that ensures everyone follows through on their promises before money and property change hands.

Contingencies

Conditions that must be met for a sale to go through. Common ones include home inspection, financing, and appraisal contingencies. They're your "escape hatches" if something goes wrong.

Earnest Money

A deposit that shows you're serious about buying a home. Usually 1-3% of the purchase price, this money is held in escrow and goes toward your down payment if the sale goes through.

Multiple Listing Service (MLS)

A database where real estate professionals share information about properties for sale. It's where most homes get listed first, before appearing on Zillow or other public websites.

Comparative Market Analysis (CMA)

A report that compares your home to similar properties that have recently sold in your area. Agents use this to help determine a competitive listing price or fair offer amount.

Money & Financing

Pre-approval

A lender's written commitment to lend you a specific amount based on your financial situation. It's like getting a "yes" before you shop, making your offers much stronger in competitive markets.

Down Payment

The upfront cash you pay toward the home purchase. Typically 3-20% of the home's price, though some loans allow as little as 0% down. A larger down payment often means better loan terms.

Closing Costs

Additional fees you pay at closing, typically 2-5% of the home's price. Includes things like loan fees, title insurance, appraisal costs, and attorney fees. Often negotiable between buyer and seller.

Private Mortgage Insurance (PMI)

Insurance that protects the lender if you default on your loan. Required if you put down less than 20%. The good news? You can usually cancel it once you have 20% equity in your home.

Loan-to-Value Ratio (LTV)

The percentage of the home's value that you're borrowing. If you're buying a $300,000 home with a $240,000 loan, your LTV is 80%. Lower LTV usually means better interest rates.

Points

Fees you can pay upfront to lower your interest rate. One point typically costs 1% of your loan amount and reduces your rate by about 0.25%. Worth it if you're staying long-term.

Property Evaluation

Appraisal

A professional assessment of a home's value, required by most lenders. An independent appraiser visits the property and compares it to recent sales. If it appraises low, you might need to renegotiate.

Home Inspection

A thorough examination of a home's condition by a qualified inspector. They'll check everything from the foundation to the roof, helping you avoid costly surprises after you buy.

Comps (Comparables)

Recently sold homes that are similar to the one you're buying or selling in size, age, location, and features. They're used to determine fair market value and justify pricing decisions.

Square Footage

The total floor area of a home's interior living space. Important note: different areas measure this differently, and not all spaces (like unfinished basements) count toward the total.

Curb Appeal

How attractive a property looks from the street. First impressions matter in real estate, and good curb appeal can significantly impact both sale price and time on market.

As-Is

The seller won't make any repairs, regardless of what the inspection reveals. You're buying the property in its current condition. Often means a lower price, but factor in potential repair costs.

Legal & Documentation

Title

Legal ownership of a property. A clear title means there are no liens, disputes, or other claims against the property. Title insurance protects you if issues are discovered later.

Deed

The legal document that transfers ownership from seller to buyer. It gets recorded with the county and serves as proof that you own the property.

Lien

A legal claim against a property, usually for unpaid debts like taxes, mortgages, or contractor bills. Liens must typically be paid off before a property can be sold with clear title.

Homeowners Association (HOA)

An organization that manages a community's common areas and enforces rules. Comes with monthly or annual fees and regulations about what you can do with your property.

Covenants, Conditions & Restrictions (CC&Rs)

Rules that govern what you can and can't do with your property in certain neighborhoods. Think paint colors, fence heights, and whether you can park an RV in your driveway.

Right of First Refusal

A contractual right that gives someone (like an HOA or tenant) the first opportunity to buy a property before it's offered to others. Common in condos and some planned communities.

Market Conditions

Seller's Market

When there are more buyers than available homes, giving sellers the advantage. Expect multiple offers, bidding wars, and homes selling quickly, often above asking price.

Buyer's Market

When there are more homes for sale than buyers, giving buyers the advantage. Homes stay on the market longer, and buyers have more negotiating power on price and terms.

Days on Market (DOM)

How long a property has been listed for sale. In hot markets, low DOM is normal. High DOM might indicate pricing issues or problems with the property.

Absorption Rate

How quickly homes are selling in a particular area. Calculated by dividing the number of homes sold by the number available. Helps determine if it's a buyer's or seller's market.

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