Common Terms in Real Estate that you Should Know

The real estate process can be really convoluted, especially for first-time home buyers. It involves the use of technical terms and concepts that adds a layer of confusion to an already complicated process. So if you’re planning to buy a home, having a basic understanding of the terminologies and jargon involved in buying a house can make the experience a little less complicated. 

Here are some common real estate terms that one should know when planning to purchase a home. 

Acceptance - is when the buyer and the seller of a property agree to the terms set by an offer by signing a Purchase and Sale Agreement. 

Appraisal - the determination of a property’s market value by an estimate of an appraiser. An appraiser is a person authorized to assess the monetary value of something, e.g., a home property.

Closing - the final phase of the home buying process when the ownership of a house is officially transferred from the seller to the buyer. 

Contingency - a provision in a contract that states events or occurrences that make a contract null and void. The most common example is the home inspection contingency where the buyer may opt not to complete the purchase if the result of the home inspection report does not meet his/her standards.

Earnest Money Deposit (EMD) - the partial deposit initially paid by the buyer to the seller to demonstrate good faith. The EMD is kept by the seller if the buyer fails to make the full payment in time or if there is a breach of contract.

Escrow - a contractual arrangement in which a neutral third party holds the funds or documents of a transaction (in this case, a real estate transaction) until the conditions agreed by the parties have been met.

Fair market value (FMV) - the actual worth of a property derived from the marketplace. This is the price a buyer is willing to pay in an open and competitive market. 

Multiple Listing Service (MLS) - is a private real estate database of past and current listings, and other housing market information in a local area.

Offer - a legal document that outlines the proposal of a buyer to buy the property of a seller. This becomes legally binding once signed by the seller. 

Pre-approval - is the process by which a lender determines how much a borrower is qualified for a (mortgage) loan based on their income, assets, and credit score. 

The real estate process is bewildering and not surprisingly, so is most of the terminology that comes with it. While you do not have to be a subject matter expert to enter into a real estate transaction, it’s still best to be in the know.