Real Estate Terms
Appraisal - The process of developing an opinion of value for real estate property. This evaluation is completed by a certified/licensed Appraiser, and is typically ordered by the buyer’s lender
Closing of Escrow/Closing - When the transaction is complete, and the buyer legally owns the property
Commission - The compensation paid to the real estate agents at closing. This can be paid by the buyer, seller, or split between both parties
Contingencies - Terms of a contract specifying actions or requirements that must be met for the contract to become legally binding
Debt-to-Income Ratio - Your monthly debts divided by your monthly income
Deed - Legal document that grants ownership to a piece of real estate or other property asset
Down Payment - The amount paid by the home buyer to the lender at closing
Earnest Money - A “good faith” deposit by the buyer at the time of purchase agreement. It shows the buyer is serious about the purchase and the amount is applied to the purchase of the property
Escrow Account - Created by the lender to pay property taxes and homeowners insurance. A portion of the monthly mortgage payment is set aside to cover these expenses when due
Equity - The difference between what is owed on the mortgage and what the home is currently worth
Foreclosure - When the lender takes possession of the property due to non-payment
Lien- Claim or legal right against a piece of property that is typically used as collateral to satisfy a debt
Lienholder - A person or company, such as a bank or mortgage company, that legally has an interest in the property until paid off in full
Mortgage- A legal agreement by which the bank lends money in exchange for taking the title of property
Pre-Approval Letter - Letter from the lender stating that you can afford a property at a certain price
Possession Date - The day the buyer can move into the home. This is usually the same day as closing, but ultimately depends on the terms of the contract
Purchase Agreement - A contract between buyer and seller noting the sales price and terms of the transaction
Property Taxes - Tax paid by the property owner, which fund services in the local county, city and town: public schools, emergency services, road maintenance, etc.
Short Sale - When a home is sold for less than the balance of the mortgage to avoid foreclosure
Title - The legal evidence of ownership of a property
Title Company - A third-party professional that researches the property history and handles the closing of a transaction
Title Search - A review of all public records of a home’s history, including previous purchases, sales, taxes, and liens
Under Contract - When the buyer and seller sign the purchase agreement/contract, showing both sides agree to the terms of the sale. This listed home goes into a pending status
Underwriting - The process of the lender verifying income, assets, debt, and property details, in order to issue a final approval on the loan application