Real Estate Terms Cheat Sheet
Talking about real estate can often sound like listening to the adult voice in Charlie Brown cartoons. This is especially true for first-time home buyers just beginning to dip their toes in what will likely be the biggest purchase of their lives.
No need to feel overwhelmed. A little bit of knowledge can go a long way towards making you feel more comfortable with the language. Here’s a handy cheat sheet to help you get started on the path to fluency in the lingo of real estate:
Active Listing: A property currently on the market and available for sale. It may have received offers, but none have been accepted, which means that the opportunity is wide open for you to make a proposal.
Appraisal: An informed, impartial and well-documented opinion of the value of a home, prepared by a licensed and certified and the appraiser’s own walk-through.
CMA: Comparative market analysis or competitive market analysis. A CMA is a report that shows prices of homes comparable to a subject home and that were recently sold. The sold prices, known as comps, can help homeowners determine how much their home is worth in the current market.
Closed: The property is sold and no longer available.
Closing costs: When you finalize the purchase of your home, you’ll have to pay for a variety of fees associated with the home-buying process. Real Estate Brokerage commission is typically paid by the seller in NC. The buyer should get an estimate of these fees from the lender shortly after applying for a loan.
Down payment: The lump sum in cash that you can afford to pay at the time of purchase. Traditionally, down payments are 20% of the purchase price, so if you are buying a home for $500,000, your typical down payment would be $100,000. It is possible to put less than 20% down, but mortgage insurance would most likely be required. No-down-payment loans exist for veterans and others, and there are also down payment assistance programs.
Due Diligence (DD): In the state of North Carolina, buyers and sellers enter into a contract with a Due Diligence agreement in place. All parties agree upon a specified period of time during which inspections can be done, financing can be secured, and any other assessment on the property can be done to determine if the buyers would like to complete the sale. A nominal fee is often exchanged, securing the right for the buyers to back out for any reason at all during this period without jeopardizing their more substantial Earnest Money Deposit. This money belongs to the seller immediately upon contract acceptance. It will appear as a credit on a closing statement, but belongs to the seller if the buyers back out.
Earnest Money Deposit (EMD): This is typically a larger sum deposit put in escrow at the closing attorney’s office. A good rule of thumb is 1% of the purchase price. This money shows the sellers that the buyers intend to close and are willing to put funds on hold specifically for that purpose. The EMD is completely protected until the Due Diligence period ends. It’s very important that all property concerns are addressed during this period. Your deposit will be forfeited if the buyers breach contract after the Due Diligence period. At closing, the EMD will be deducted from buyers cost to close.
Expired: The property listing with the agent has expired and is no longer active (usually because it didn’t sell). It could mean the seller is still open to accepting an offer, so it’s worth touching base if your curiosity is piqued.
Fixture: Anything of value permanently attached to or a part of real property (real estate is legally called “real property,” while movables are called “personal property”). Fixtures include wall-to-wall carpeting, light fixtures, attached hardware, bathroom mirrors, and in-ground landscaping.
FSBO: For sale by owner.
HOA Dues: Dues imposed by the Home Owners Association to maintain various aspects of the property. Every HOA is different in terms of what they cover, how much they charge and when fees are due. Be sure you understand these fees and have reviewed HOA rules and other particulars as these will be a part of your continuing costs associated with the property.
Listing: An agreement between a real estate broker and a homeowner that allows the broker to market and arrange for the sale of the owner’s home. The word “listing” is also used to refer to the for-sale home itself. A home being sold by the owner (FSBO) without a real estate agent isn’t a “listing.”
Lock box: Locked key-holding device affixed to a for-sale home so real estate professionals can gain entry into the home after obtaining permission from the listing agent.
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. Membership isn’t open to the general public, although selected MLS data may be sold to real estate listing websites. MLSs are local or regional. There is no MLS covering the whole country.
Radon: A naturally occurring colorless, odorless gas that can increase risk for developing lung cancer. Radon testing is easy and should always be done when buying a home. Should the test come back with a high reading, radon mitigation systems are relatively simple and inexpensive to install.
Realtor®: A real estate broker or sales associate who is a member of the National Association of REALTORS®, which means that they must uphold the standards of the association and its code of ethics. Not all real estate agents are Realtors.
Temporarily off the market: The owner has removed the property from the listings for an undetermined period, usually because work is being done on the house or because the home cannot be shown. It should return to active soon enough, so it’s certainly worth piping up if you’re smitten.
Title insurance: An insurance policy that protects a lender’s or owner’s interest in real property from assorted types of unexpected or fraudulent claims of ownership. It’s customary for the buyer to pay for the lender’s title insurance policy.
Under contract: The seller has an agreed-upon contract with the potential buyer. That doesn’t mean that it’s a done deal, however.
Withdrawn: A property was withdrawn from the realty market. The sellers may have decided they want to stay or they may not have received any acceptable offers. If you adore what you see in the listing, it can’t hurt to inquire.
Now that you’ve had a crash course, I hope you’ll feel more confident while learning about buying and selling real estate. If you’re still feeling overwhelmed, ditch the cheat sheet and give me a shout. I’ll be happy to answer any questions you might have.