Real Estate Jargon Decoded: Terms Every Buyer and Seller Should Know

Navigating the world of real estate can feel overwhelming, especially when industry-specific jargon is thrown around. Whether you’re a first-time buyer or a seasoned seller, understanding key terms is essential to making informed decisions. This guide will help decode the most common real estate terms to ensure you feel confident throughout the process.

For Buyers:

1. Pre-Approval Before you start house hunting, getting pre-approved for a mortgage is a crucial first step. Pre-approval means a lender has reviewed your financial information and determined how much they’re willing to lend you. This shows sellers you’re a serious buyer and gives you a clear budget.

2. Closing Costs Closing costs are the fees and expenses you’ll pay when finalizing your home purchase. These typically include loan origination fees, title insurance, escrow fees, and more. They usually range from 2% to 5% of the home’s purchase price, so be sure to budget for them.

3. Contingency A contingency is a condition that must be met before the sale can proceed. Common contingencies include home inspections, appraisals, or financing approval. For example, if a home inspection reveals major repairs, you may renegotiate or walk away without penalty if you have an inspection contingency.

4. Earnest Money Deposit This is a good-faith deposit made by the buyer to show serious intent to purchase the home. It’s typically held in an escrow account and applied toward the purchase price at closing. If the deal falls through due to a contingency, you’ll usually get this deposit back.

5. Escrow Escrow refers to a neutral third party that holds funds or documents until all conditions of the sale are met. For buyers, this ensures that your money is safely held until the transaction is complete.

6. Fixed-Rate vs. Adjustable-Rate Mortgages A fixed-rate mortgage means your interest rate stays the same for the life of the loan, providing consistent monthly payments. An adjustable-rate mortgage (ARM) starts with a lower interest rate that adjusts periodically based on market conditions, which could lead to higher payments later.

For Sellers:

1. Listing Agreement A listing agreement is a contract between a seller and a real estate agent, granting the agent the right to sell the property. This agreement outlines the commission rate, duration of the listing, and other terms of the arrangement.

2. Comparative Market Analysis (CMA) A CMA is a report prepared by your agent to estimate your home’s market value. It compares your property to recently sold, similar homes in the area, helping you set a competitive and realistic listing price.

3. Staging Staging involves preparing your home for sale by arranging furniture, decluttering, and making minor updates to appeal to buyers. Professionally staged homes often sell faster and at higher prices.

4. Days on Market (DOM) This refers to the number of days a property has been listed for sale. A high DOM can signal to buyers that a home is overpriced or has other issues, while a low DOM can indicate high demand.

5. Seller’s Disclosure This is a legal document in which the seller outlines any known issues with the property, such as past repairs, structural damage, or neighborhood concerns. Transparency is key, as failing to disclose certain issues can lead to legal trouble.

6. Net Proceeds Net proceeds refer to the amount of money you’ll walk away with after all expenses, such as the agent’s commission, closing costs, and remaining mortgage balance, are deducted from the sale price.

For Everyone:

1. Appraisal An appraisal is a professional assessment of a property’s market value, typically conducted by a licensed appraiser. Lenders require an appraisal to ensure the home’s value matches the loan amount. For sellers, this ensures buyers are securing financing appropriate for the home’s worth.

2. Title Insurance Title insurance protects buyers and lenders from potential legal disputes over property ownership. It ensures there are no unresolved claims or liens on the property.

3. Multiple Listing Service (MLS) The MLS is a database where real estate agents list properties for sale. It provides wide exposure to potential buyers and their agents, making it a powerful tool for sellers.

4. Under Contract When a home is “under contract,” it means the buyer and seller have agreed to terms, but the sale hasn’t been finalized yet. Contingencies and inspections are often completed during this phase.

Why Knowing These Terms Matters:

Understanding real estate terminology can save you from confusion, delays, or costly mistakes. Whether you’re negotiating a deal, reviewing documents, or planning your budget, being well-versed in these terms ensures you’re prepared every step of the way.

If you’re unsure about anything during your real estate journey, don’t hesitate to ask your agent for clarification. A good real estate professional will always take the time to make sure you understand the process and feel confident in your decisions.