Real Estate Terms inside a transaction can be confusing and convoluted when you don’t deal with these everyday.
Whether you are buying or selling a home, it’s a good idea to be familiar with these terms and phrases!
Real Estate Jargon
Yes, as with most industries, there is some lingo that agents and other vendors use. Here are a few and their meanings:
Buyer’s Market: A Buyer’s Market is going to be ideal for someone who is looking to buy a house. This means there are more homes for sale (inventory of existing homes) in the local area than their are people looking to buy homes. Basic supply and demand – more supply than demand is the case for a Buyer’s Market.
Broker: In Indiana, a real estate broker is someone who has passed the required courses as well as the state test and acquired their broker license to represent a seller or buyer of a real estate property. Just like me – Mandee Sears of GPS Real Estate!
Closing: Closing is good news! Closing means ownership of a property has officially changed hands.
CTC: This stands for “Clear to Close” meaning the lender has given final approval to close the purchase transaction. We LOVE this!!
Realtor: A REALTOR is a state licensed real estate agent who takes it a step further and is a member of the National Association of Realtors (NAR).
Seller’s Market: A Seller’s Market means there are more buyers looking to buy a home than there are homes for sale. Again, supply and demand – there is more demand than there is supply to fill it.
Real Estate and Mortgage Loan Terms
Adjustable-Rate Mortgage (ARM): This is a type of mortgage loan whose interest rate varies for however long the loan lasts depending on loan terms and prime rate index.
Amortization: This is a schedule of all payments due on a loan (first to last) with the principal and interest broken down per payment.
Appraisal: A third party, unbiased and licensed appraiser will complete and turn into the Lender a written report giving an opinion of the current value of a property. Lender’s require an appraisal with most mortgage loans (though appraisal waivers can happen.)
Appreciation: An increase in the value of a property – permanent or temporary. (see depreciation for comparison)
As-Is Condition: A seller is selling a home or a buyer is buying a home in “As-Is” condition, meaning the buyer is allowed to have any/all inspections they would like but the seller is under no obligation to repair anything or even offer an allowance. The inspection is considered for the Buyer’s own knowledge. If a previously undisclosed defect is found, the buyer can cancel the purchase and receive their earnest money back, without penalty.
Assessed Value: The value of a property as determined by the local governing authority. It is used as the basis for determining the property tax amount.
Clear to Close: This is our FAVORITE of real estate terms! This means the lender has given final approval to your loan and you are “Clear to Close” the transaction!
Closing Documents/Package: Buyers and Sellers both receive a copy of all appropriate signed contracts, disclosures and miscellaneous forms used to convey real estate from a seller to a buyer. In Indiana, the Title Company will deliver the copies for all.
Debt-to-Income Ratio (DTI): This is the percentage of your gross monthly income that goes toward paying allowable monthly housing expense, child support, etc…
Earnest Money: Earnest money is an initial deposit that accompanies an “offer to purchase” a home. It’s like a deposit or good faith money, showing a seller that you are a serious buyer. You can forgo Earnest Money if all parties agree, but it is not typical.
Equity: The difference between the current market value of a home and what the homeowner still owes on his/her mortgage is the equity.
Fair Market Value: The price a buyer is willing to pay and a seller is willing to take for real estate. This is typically determined by an analysis of up to the last 12 months of the local real estate market’s comparable sold properties.
Foreclosure: This is the process where a mortgaged property may be repossessed and sold by the mortgage holder when the mortgage loan is in default. Foreclosure times vary state-by-state but usually occur anywhere from two to three months after failed payments.
Forbearance: Forbearance occurs when the lender postpones the normal monthly mortgage payments for a specified period of time to give the borrower time to catch up all overdue payments, penalties and fees (still accruing typically.) Before or by the end of the forbearance period, the borrower must bring the mortgage loan completely up to date – usually with a large lump sum payment of everything due.
Homeowner’s Insurance: This type of insurance is for homeowner’s and is required by a property that is mortgaged. It protects and covers the mortgaged property from damages due to weather, fire, vandalism, etc…
Listing Agent: This is the agent who lists the home for sale and represents the seller throughout the selling process.
Loan to Value (LTV): The relationship between the total amount of a mortgage and the total value of the property.
Multiple Listing Service (MLS): A service for your local area that combines all the different brokerages homes for sale. For our area, the MIBOR Property website is a great place to search for homes!
Mortgage: The mortgage is a legal document that pledges a property to the lender as security for the repayment of the mortgage debt.
Preapproval: A letter from a lender stating that a buyer is approved to purchase a home up to a certain price or monthly mortgage payment. This is sent, along with an offer to a seller as proof the buyer can actually purchase the home. It is not a guarantee of final loan approval but rather that the initial research says the buyer can afford ______ as a mortgage expense.
Rate Lock: An agreement with the lender where the interest rate is “locked in” or guaranteed for a specific time period.
Refinance: This is to finance something again. It usually means the homeowner wants to use their equity to get a better interest rate, update their home, pay off their loan faster, get a fixed rate loan, etc…
Underwriting (UW): An underwriter is used to determine how much of a risk it a lender will take on if they decide to give you a loan. They will be the ones who look at your credit history, income, assets, debt, past taxes, etc…
We will be adding to this list of real estate terms as we go, so bookmark and come back!
