A Special Report from The Pujals Team, Coldwell Banker Brokers of the Valley
When you’re buying or selling a home, you’re sure to hear many real estate terms that may be unfamiliar to you. Not knowing the real estate lingo is common and nothing to be embarrassed about. Since you don’t live and breathe real estate day in and day out, there’s really no need for you to know the exact terminology.
However, when you find yourself in the role of home buyer or home seller, being up-to-speed with real estate terminology can be helpful and make the process feel less stressful. Following are the top ten real estate terms you’re most likely to hear during the transaction.
10 Common Real Estate Terms
The estimated value of a property based on a qualified appraiser’s written analysis. Banks typically require appraisals before issuing loans to ensure the estimated value of the property adequately exceeds the amount borrowed.
2. Buyer’s Agent
A licensed real estate agent who represents the interests of the home buyer during the transaction. The buyer’s agent has authority to act on behalf of the buyer in negotiating a purchase and sale agreement with the seller’s agent.
3. Closing Costs
Fees associated with completing the real estate transaction. Some fees are paid by the seller and some are paid by the buyer. Closing fees can include such things as credit report fees, document preparation fees, deed recording fees, appraisal fees, real estate fees, etc.
Conditions that must be met prior to closing a real estate transaction. Some common contingencies include a home inspection (to ensure the home has no serious defects), a financing contingency (which releases a buyer from the sales contract if their loan falls through), or that a buyer must first sell their current home. In general, the fewer contingencies required, the stronger a buyer’s negotiating position in terms of getting the best price.
5. Earnest Money
Money a buyer pays soon after a home seller has accepted the buyer’s offer. Sometimes this is also called “good faith money.” The amount of earnest money required varies, but usually it’s 1%–3% of the sale price of the home. Earnest money is held by a neutral party to demonstrate the buyer has serious interest in purchasing a property. Once the home sale has been completed, the earnest money is applied toward the buyer’s closing costs. If the buyer backs out of the sale due to a failed contingency (for example, the buyer’s financing falls through), the buyer can recover their earnest money in full. If the buyer backs out of the sale for reasons not covered by contingencies, they forfeit the earnest money and it goes to the seller.
A thorough professional examination (at the buyer’s expense) that evaluates the structural and mechanical condition of a property (plumbing, foundation, roof, electrical, HVAC systems, etc.). This highly recommended step is a common contingency clause in real estate sales contracts. If the inspector identifies issues that may be expensive to remedy, the buyer can negotiate with the seller to fix them or to lower the sales price, or the buyer can choose to walk away from the sale.
A listing is any property that has been “listed” for sale with a real estate agent. The listing may be printed or digital. It includes exterior and interior photos of the property, as well as a written description and details of the property, such as the number of bedrooms, baths, featured rooms, other structures, and the price.
8. Listing Agent
A licensed real estate agent who represents the interests of the seller during the transaction. The listing agent (also called the seller’s agent) writes the listing, puts the home on the MLS (Multiple Listing Service), markets the home to potential buyers, and negotiates on the seller’s behalf.
9. Pre-Approval vs. Pre-Qualification
These two terms are often confused and used interchangeable, although they are two very different things. A pre-approval is a document from a lender confirming they’ve reviewed a buyer’s credit, income, employment, and assets and are willing to lend a specific amount of money to buy a home. It tells the buyer how much he or she can afford. Realize that getting a pre-approval does not guarantee the loan will close. Having a loan pre-approval before making an offer is recommended. Pre-qualification is much less official than a mortgage pre-approval. With a pre-qualification, the lender has not verified any of the buyer’s information. It’s really just an estimate of what a buyer might qualify for. It is often used early in a buyer’s search to help determine a reasonable price range for properties to view.
10. Sales Contract
A legal agreement between a buyer and seller to purchase real estate, for a specified price and terms, for a limited time period (also called a purchase agreement or a binder). When initially presented to a seller, this document is often called a purchase offer. Once the seller accepts (or the buyer accepts the seller’s counter offer), it becomes a legally binding sales contract.
Knowledge is Power
Don’t let terminology make your real estate experience feel intimidating or stressful. Now that you know exactly what these common real estate terms mean, you can feel confident during your transaction. And whether you’re the buyer or the seller, confidence in any endeavor always leads to better results.
Are you ready to buy or sell? Let us help you find your Napa Valley dream. We can also help you sell your Napa Valley home for top dollar. When you’re ready to make your move, contact us 707.249.0518 or firstname.lastname@example.org.