Real estate involves its own language, and there are A LOT of words that get tossed around when you buy or sell a home. What’s a FSBO, and why does it sound like a bad ‘80s hairstyle? Straight from the Tucker Company experts, here are some real estate ABCs to keep you in the know during your next real estate transaction.
A is for Appraisal
An appraisal is an estimation of a home’s market value by a licensed appraiser based on comparable recent sales of nearby homes. Appraisals are often used when the buyer of a property is obtaining financing, however, sellers can request one as well.
B is for Backup Offer
A backup offer occurs when a seller is already under contract with a buyer, but accepts a contract with a second potential buyer to have as a backup in case the first contract falls through. A backup offer acknowledges the existence of an initial offer and says if the first buyer cancels, then the second buyer is automatically in contract with the seller.
C is for Contingent Offer
A contingent offer occurs when an offer on a home has been made and accepted by the seller, but certain conditions must be met before the sale is final. These criteria, or contingencies, typically fall under three major categories – appraisal, home inspection and mortgage approval – and are usually put in place to protect the buyer if something goes wrong in the sale.
D is for Down Payment
A down payment is a percentage of the home purchase price (usually between 5% and 20%) paid upfront to the seller in cash. The amount you’ll be required to put down on a house depends on the type of loan you get and lender requirements.
E is for Earnest Money
Earnest money is an amount of money deposited by a buyer under the terms of a contract. The deposit shows that the buyer is serious about buying the home and will uphold their end of the Purchase Agreement. Earnest money is usually held in an escrow or trust account until closing, where the funds are used towards the purchase price of the home. It is not to be confused with a down payment or closing costs.
F is for Federal Housing Administration (FHA)
The FHA is a United States government agency that insures loans designed for low- to moderate-income buyers. Most FHA loans are for individuals who would not ordinarily qualify for a conventional home mortgage loan.
G is for Good Faith Estimate (GFE)
Provided by a lender to a borrower, a good faith estimate was an estimate of fees due at closing, including loan-processing charges and inspection fees. New mortgage rules in 2015 replaced this form with one called a Loan Estimate.
H is for Homeowners’ Association (HOA)
A Homeowners’ Association is a management organization within a community, subdivision, or neighborhood that creates and enforces rules for properties within its jurisdiction. HOAs collect fees or dues (monthly or yearly) from all community members in order to help ensure that the community looks its best and functions smoothly.
I is for Inspection
An inspection is an examination of the physical structure of a property, from the roof to the foundation, and its systems performed by a qualified professional. An inspection is usually done before the sale of a home to minimize unpleasant surprises and unexpected difficulties in a property.
J is for Jumbo Mortgage
A jumbo mortgage is a mortgage exceeding the conforming loan limit, commonly used for luxury home purchases over $510,400. This type of mortgage allows you to borrow a larger sum of money for a property than a loan that “conforms” to the standard limits set by Fannie Mae or Freddie Mac regarding credit, debt, and loan size.
K is for Key Rate
A key rate is an interest rate set by the federal government that determines the cost to borrow money.
L is for Listing Agreement
A listing agreement is a contract between you (the property owner) and your REALTOR®, granting them the authority to act as your agent in the sale of the property within a given time, for which service you agree to pay a commission.
M is for Multiple Listing Service (MLS)
The Multiple Listing Service is a database and marketing platform exclusively for REALTORS® to list and cooperatively market homes for sale. In the central Indiana market, the MLS is branded the Broker Listing Cooperative®.
N is for Net Proceeds
Net proceeds are the amount you (the seller) receive at closing after all other costs and expenses have been deducted from the home sale price.
O is for Open House
An open house is a scheduled event hosted by a listing agent to showcase a home to potential buyers.
P is for Pre-Approval Letter
A pre-approval letter is a document indicating a lender is willing to loan a specific amount of money for a home purchase. You must complete an official mortgage application to be pre-approved. After a pre-approval, you’ll have a better idea of the interest rate you’ll be charged on your loan.
Q is for Quitclaim Deed
A quitclaim deed is a deed transferring property rights without any validation of ownership. This particular type of deed is typically used between spouses and family members and in Indiana, must be notarized, and then recorded at the County Recorder’s office.
R is for Refinance
A refinance occurs when an existing interest rate, payment schedule, or terms of an existing mortgage are replaced with a new one that typically extends more favorable terms to the borrower.
S is for Seller Disclosure
A seller disclosure is a document completed by the seller of a home, disclosing the known history and defects of a property. The seller must complete and sign the disclosure form and submit the form to a prospective buyer before an offer is accepted for the sale of the home.
T is for Title
When you purchase a home, the title gives you the right to or ownership of the property and is recognized and protected by the law. The title is not a document, but a concept that says you have the rights to use that property – a deed is the official document.
U is for Under Contract
A property is under contract when a buyer has submitted an offer to purchase and that offer has been accepted by the seller, but the closing is not yet finalized.
V is for VA Loan
A VA loan is a $0 down mortgage loan for Veterans, Service Members and their military spouses. VA loans are made by private lenders, such as banks or mortgage companies, and guaranteed by the U.S. government, enabling veterans to obtain more favorable terms.
W is for Walk-Through
For the home buyer, a walk-through is the final inspection conducted before a home sale is final. This is a chance for the buyer to see their new home right before they close and to ensure it’s in the same condition as it was when they first completed their inspection.
X is for “X” Marks The Spot
Okay, okay – this one is a bit of a stretch, but find us a real estate term that starts with an X. “X” marks the spot along the dotted line where you sign for your dream home!
Y is for Yield-Spread Premium (YSP)
A yield-spread premium is compensation to the originating lender from another lender acquiring the loan to service for the Government Sponsored Entities (GSEs).
Z is for Zero-Lot Line
A zero-lot line residence, also known as a narrow lot home, is a home built very close to or directly on the property line, leaving virtually no space left over on the lot.