Real Estate Jargon A to Z
Whether you’re buying or selling your home, there are a ton of terms that are going to pop up. You’re not expected to know every bit of real estate terminology, so use this to your advantage! If you’re looking at this terminology because you’re moving, then check out our tips for packing and moving.
Active Contingent
An offer is active contingent once the seller has accepted an offer from the buyer. This doesn’t mean that the house is immediately sold, but it’s based on the idea that the buyer can pay the loan (which can require things from the lender, the seller, and/or even the buyer).Active Under Contract
Sometimes you’ll notice a house listed as active under contract; this is similar to active contingent. However, a seller may want to keep the listing active for future offers if they’re not sure about the buyer meeting the requirements.Addendum
Once a contract has been established, changes can be added. These are called addendums, and they typically affect one area of the contract instead of the entire thing.Adjustable-Rate Mortgage (ARM)
When you’re looking for a mortgage, an adjustable-rate mortgage, also called ARM, allows for interest rates to change. While there’s an off-chance you could end up with lower interest rates in the future, you’re more likely going to pay more than you do in the beginning.Annual Percentage Rate (APR)
Your APR, or annual percentage rate, is how much interest you’ll pay on your loan year-after-year. This can be helpful to know when you’re looking to get approved from different lenders.
Assessed Value
The assessed value is the value of a home using homes in the area and the condition of the home. Oftentimes, the seller does this before listing a home, but a buyer can do this as well to get a second opinion. This is also used to discover the amount of taxes the seller pays.Broker
Brokers are the top-of-the-line real estate help. They’ve gone through higher education and know about every stage of the real estate industry, including law. If you use a real estate agent, then he or she will be working under a broker.Buydown
A buydown is a method that a seller can use to lower the monthly payment a buyer will be paying by actually giving the money to the lender. This can either apply for a few months or change the lifetime of the loan.Chain of Title
If you’re wondering about the entire history of a home, then you can look for the chain of title. It’ll list all previous owners, like a CarFax for homes!Closing
Closing means that a house is being sold. There’s a date set where ownership will be transferred, and that there’s a deal all parties agree with. At this stage, the house comes off the market if it’s been active under contract.Closing Costs
Closing costs are the costs that are typically paid by the buyer on the closing date (or before). These typically sit around 3% to 4% of a home’s value, and it’s different than the down payment.Co-Borrower
Like any other loan or credit check, you can get a co-signer on your mortgage. This can be anyone that’s willing to take responsibility of your mortgage if you happen to default.
Common Area Assessments
This is a type of way to pay into the environment around you. Typically, they manifest as Homeowner’s Associations, but you can find generalized ones in other communities as well.Contingency
Contingency means that the sale of a home is in the process. There’s been an offer, but the offer is only valid once certain things happen, such as an inspection or even new paint in the living area. This can be set by the buyer or the seller, and it can even include things like another home selling by a certain time.Default
A default means that the person borrowing money from a lender has not paid that lender, which typically happens after 90 days. This can happen with any loan, including mortgage loans.Due-On-Sale Clause
The due-on-sale clause, also called the acceleration clause, makes it so that the owner of a property has to pay the mortgage in full once a home is sells, including interest. This was put in place to protect the lender from lower-than-average interest rates.Encroachment
An encroachment is when an owner steps over their property lines with something like a fence or building. This is a violation of rights towards the neighbor.Escrow
When you’re buying a home, you typically give the money check for the purchase of the home to a third-party. At this point, the money is in escrow, and the seller receives the money at closing.Fixed-Rate Mortgage
Fixed-rate mortgages mean that your interest rate will stay the same throughout your entire payback time of your loan. This is common, and it’s the opposite of an adjustable-rate mortgage. For the person borrowing money, it’s a predictable way to know about how much their mortgage will be for however long.
Home Inspection
Whether you’re a buyer or a seller, you normally have a third-party carry out a home inspection to make sure that everything in the home is functioning and in good condition. Certain things like HVAC units or foundation issues aren’t easily seen, and issues with them will impact the value of the home overall.Homeowner’s Association (HOA)
Homeowner’s Associations (HOAs) are community organizations that protect the environment around a home by requiring certain things like fence styles or keeping your lawn cut. If there’s one in your development, then you’re required to join in, and you’ll have to pay fees that will help cover the expenses of the community you’re in.Lender
The lender in a real estate transaction is the person giving the mortgage loan to the buyer. This can be a bank or other financial groups that lend money. This is also who will collect the loan throughout the years of the loan.Lien
When you default on a loan, there’s typically a lien that includes all of the unpaid debt owed on a property. This is a legal piece of documentation, and you’re required to take action on it. If you’re selling your home and have a lien out, then this can cause issues.Pending
Pending is the step in between active contingent and closing. Once everything that’s contingent finishes, then the buyer and seller start agreeing on a closing date. This is considered pending.Pre-Approval
When you begin looking for a home to buy, then you’ll typically need to be pre-approved from a lender before any realtor will work with you. This will give you an amount to how much money you’re approved for after a lender checks your credit. A pre-qualification is sometimes used instead, and the only difference is that it’s a rough estimate of how much money you’re approved for (again, after your information is verified).Purchase Agreement
A purchase agreement simply states that the buyer is interested in buying a piece of property and the seller is interested in selling that same property. This is a legally binding document that also explains the terms of the deal, and it holds everyone accountable.Transfer Tax
When you sell something that has a title, like a home or a car, you have to pay the transfer tax that covers the cost of transferring the title and ownership over the new owner. Normally the seller covers this cost.