Real Estate terminology can be incredibly confusing. In an effort to make it a little easier to understand, I’ve compiled the list below of 35 common real estate terms and their meanings.
1. Listing Agreement
A Listing Agreement is a contractual agreement that establishes the name of the Real Estate Broker appointed by the Seller to represent the Seller. Other components of a Listing Agreement include the name of the Seller(s); the property address; the Seller’s asking or list price for the property; and the Broker’s service fees.
2. Multiple Listing Service (MLS)
The Multiple Listing Service or MLS is a platform used by real estate brokers which promotes real estate listings and allows cooperation and compensation among other real estate agents.
3. Competitive Market Analysis (CMA)
A Competitive Market Analysis or CMA is an evaluation performed by a real estate agent for a Seller which assesses, based on current market conditions and recent sales of similar properties, the value to be expected for a particular property.
4. Buyer’s Agent
A Buyer’s Agent is the real estate salesperson chosen by a Buyer to assist throughout the purchasing process and work to protect the Buyer’s interests.
5. Seller’s Agent
A Seller’s Agent or Listing Agent is the real estate salesperson chosen by a Seller to assist throughout the selling process and work to protect the Seller’s interests.
6. Dual Agency
Dual Agency is created when a real estate Broker represents both Buyer and Seller in a transaction. Real estate license law requires agents disclose to both parties the potential of and consent for dual agency.
7. Real Estate Broker
A Real Estate Broker is a licensed real estate salesperson who has successfully completed additional training and licensing requirements to work independently and/or employ other real estate agents. Real Estate Salespersons are required to work under the supervision of a Real Estate Broker.
A Commission is the amount of a real estate broker’s fee for services. Often a percentage of sale, the Commission is generally paid by the Seller and shared between the Buyer’s and Seller’s Agent.
10. Counter Offer
A Counter Offer is a written proposal given by a Seller to a Buyer in response to an Offer to Purchase. Subsequent Counter Offers can be presented back and forth between Buyer and Seller until all terms are accepted by both parties.
11. Purchase Agreement
A Purchase Agreement is a document and legally binding contract between Buyer and Seller which illustrates the sale terms both parties have agreed to.
An Addendum is a document and legally binding contract between Buyer and Seller which accompanies the Purchase Agreement. An Addendum often includes omissions or additional terms, if any, since the original Purchase Agreement was written.
A Contingency is a provision or clause to a contract which requires a specific event to occur, usually with a specified time frame, or the contract becomes null and void.
14. Earnest Money
Earnest Money is a form of deposit made by a Buyer to demonstrate good faith to the Seller that the Buyer is serious about proceeding with the transaction.
A Showing is a scheduled appointment for a prospective Buyer to view a property. Showings are arranged by a Buyer’s Agent, who will accompany the Buyer during the private tour.
16. Open House
An Open House is a scheduled time when a property for sale is open and available for potential Buyers to view. Open Houses are arranged by a Seller’s Agent, who hosts the public tour.
17. Home Inspection
A Home Inspection is performed by a qualified inspector who is hired on behalf of the Seller to conduct a thorough examination of the property’s condition.
An Appraisal is performed by a qualified appraiser who is hired on behalf of the Buyer and Buyer’s Lender to conduct an objective examination of the property and its value.
A Mortgage is a legally binding contract between a Creditor and a Buyer wishing to purchase a property or a Seller wishing to refinance a property. A Mortgage allows a Lender ownership rights to the property if the loan is not repaid.
20. Mortgage Pre-Qualification
A Pre-Qualification is the first step in the mortgage approval process. A Lender will review a Buyer’s credit score, income and asset, and debt information to determine an estimate of what a Buyer can afford.
21. Mortgage Pre- Approval
A Pre-Approval is the second step in the mortgage approval process. A Lender will verify a Buyer’s credit score, income and asset, and debt information for a specific loan amount.
22. Private Mortgage Insurance
Private Mortgage Insurance is a type of insurance that a Buyer may be required to carry which protects the Lender in the event the Buyer defaults.
23. Assessed Value
The Assessed Value is the value assigned to a property by county tax authorities for tax billing purposes.
24. Seller Concessions
Seller Concessions are incentives offered to the Buyer by the Seller which assist the Buyer with sale-related expenses.
Closing or settlement is a term used to describe the fulfillment of a real estate contract where ownership is transferred from one party to another. The Closing date is agreed upon by Buyer and Seller as part of the negotiating process.
26. Closing Costs
Closing costs are fees paid by the Buyer or the Seller at the final execution of a real estate contract for his own sale related expenses.
27. Title Opinion
A Title Opinion is a professional opinion prepared by an attorney or title company following a title search to determine if title to a property is clear or encumbered.
A Deed is a legal instrument which transfers ownership of property from one owner to another.
An Abstract of Title is a historical record of all legal transactions and ownership rights associated with a property.
30. Contract for Deed
A Contract for Deed is a legal agreement in which a Buyer borrows money directly from the Seller, instead of from a traditional Lender, for the property purchase. A Buyer is allowed to take possession, however ownership rights are retained by the Seller until the purchase price is paid.
31. Home Warranty
A home warranty is coverage for the repair or replacement of major components in a home. Coverage typically includes plumbing systems, appliances, electrical components, and central heating and cooling systems.
32. Home Owners Association (HOA)
A Home Owner’s Association or HOA is a private organization that sets and enforces rules for a community and charges fees to residents to improve and maintain community property.
33. Covenants and Restrictions
Covenants and Restrictions are a set of rules set by a developer or Home Owner’s Association to govern residences in a subdivision or neighborhood.
An Encroachment is typically illegal and happens when an improvement made to a property crosses over boundary lines and onto another property.