The world of real estate is full of industry specific jargon that can make you feel out of your depths at every step of the way. It can add layers of confusion to an already complicated and stressful process. This can keep you from being as confident as you should be and can keep you from ultimately achieving your goals.
Whether you are buying a home or selling your home, we’ve gone through the most essential real estate terms you should familiarize yourself with you better understand the process and plan your steps leading up to buying or selling a home.
The following terms will be grouped by the category in which they are likely to come up in! Hopefully, by the end of this quick breakdown, you’ll find yourself feeling a lot more comfortable with the upcoming steps that you will take.
Most common real estate terms:
- As is:
A home that is marketed in “as is” condition is a sign that whoever is selling the home is unwilling to perform most – or all – of the repairs that may or may not be necessary. It may also mean that the home is priced “as is” meaning that the price can be expected to be lower than the market pricing area.
Finally, “as is” can refer to the condition of the home at the time that offer was written, and if something should happen to the property from the time the offer was written to closing time which changes the condition, then the property will no longer be ”as is” and it should be brought back to its original “as is” condition at the time of the original offer, at the cost of the seller.
One thing to keep in mind is that if you are considering getting a mortgage, that lender may require repairs to the property even if the buyer and seller have agreed to as is.
- Buyer’s agent or listing agent
A buyer’s agent, also known as a selling agent, is a licensed real estate professional who has the job of locating a buyer’s next property, represents that buyer’s interests throughout negotiations for the price and terms of the purchase, and finally purchasing a home for the buyer if possible.
The agent serves as a fiduciary for the buyer.
A listing agent, also known as a seller’s agent, is a licensed professional whose job is to market the seller’s property. Similarly, it is their job to represent the seller’s best interests by negotiation on their behalf in order to secure the best price possible.
One interesting thing of note when it comes to listing agents is that listing agents can actually also act as dual agents. What that means is that the seller’s agent actually finds the buyer for the home. This is not highly common, but it is also not unheard of. If a listing agent is seeking for buyers a home, chances are good that home offers something specific that specific buyers on the market are looking for.
This agent serves as a fiduciary for the seller.
Whether you are looking to buy or sell, you can expect to pay a 2-3 percent commission to your buyer’s agent or listing agent.
- Closing and closing costs
Closing refers to when a home sale is considered to be final. This typically includes all parties signing on all required documents, all monies conveyed, and when a lender is involved it requires a full lender’s approval.
For some markets in the United States, recording the deed with the county clerk’s office is the final step in closing. Once all of these steps have been taken and completed, then a buyer’s access to the property is provided, the buyer is finally considered to be the official owner of the property.
Closing costs refer to a handful of fees that are typically paid at the time of closing a real estate transaction. Closing costs fees include fees charged by:
- The title company
- Insurance companies
- Homeowner’s insurance
- Taxing authorities
- Real estate agents
- Other closing settlement related companies
- Days on market or DOM
Days on market or DOM is defined as the exact number of days from the date that the property was listed on the market for sale to the date when the seller signed the contract for sale of the property with the buyer. For the house to be officially listed as for sale, it will have to appear on the local real estate broker’s MLS or multiple listing service.
A related measurement is the average days on market for homes sold in the specific market during a specific period of time. A lower average DOM indicates a strong market that favors the seller. A higher average DOM is a sign of a weak market that favors buyers.
It is important to take a look at current and past DOM averages to see when a good time is to list your home on the market and when is a potentially bad time. There is no question that seasonality can be a major factor.
Typically, homes are believed to sell faster in Spring and Summer compared to Winter and Fall. The reason is believed to be based around the fact that buyers are more likely to look for homes during the more pleasant weather months compared to the cold and uncomfortable ones.
- Due diligence
A due diligence period of time may be an option for buyers in the purchase agreement. This is a time frame that is provided to a buyer that gives them the chance to fully examine a property. This often includes hiring experts to inspect the property, perform necessary tests, and more. This offers a potential buyer greater insight on how to proceed with the purchase.
A buyer may also be afforded an opportunity to renegotiate the contract for the home based on their findings. It may also even lead to a possible termination of contract within a specific time frame. Due diligence is something that allows a potential buyer to fully understand what they are buying, as well as any issues that might have to be tended to upon the purchase of the home.
- Escrow holder
The escrow holder is an impartial third-party depositary or agent that collects the money, documents, personal property, or other things of value that are being held until an agreed upon happening of specified events or the completion of described conditions. These conditions are typically agreed upon by both the selling and buying parties.
- Homeowner’s association or HOA
A homeowner’s association is a private association that manages a planned community or condominium complex. When you are thinking about purchasing a property that is managed by a homeowner’s association or HOA, you are also agreeing to follow the HOA’s rules and pay its monthly dues.
If you fail to follow the rules and pay the dues, HOA’s are known to take advantage of their ability to file a lien against the property and/or foreclose on the property.
It is crucial that if you are thinking of purchasing an HOA property, that you know all of the conditions of the contract you are signing with them. For that reason, it is typically smart to hire a realtor who has specific experience working with HOA properties.
An iBuyer is something that is becoming much more popular as the years go by. Basically, an iBuyer is a company that takes advantage of technology to make an offer on your home “instantly” as the terms apply. iBuyers take on the burden of owning, marketing, and reselling your home.
Depending on the service you choose, you are able to find an option that offers an all-cash offer. It also allows you to have more control over when you sell and more.
- Multiple listing service or MLS
We briefly touched on this topic earlier, but now we’re going to go a bit more in depth. A multiple listing service or MLS is a massive database that allows real estate agents and broker members to access and add necessary information about properties that are for sale in the area.
When a home is listed as for sale in a specific area, it will get logged into the local MLS by a listing agent.
When it comes to buyer’s agents, they often check the MLS to see what is popping up on the market and what similar homes have been sold for. There are hundreds of oft-used MLS sites that are used on a daily basis by real estate agents all over the United States.
This might come as a surprise to you. While the terms real estate agent and REALTOR are typically used interchangeably, they are actually not exactly the same thing. That’s because a REALTOR is a real estate professional who has become a member of the National Association of REALTORS or NAR.
A REALTOR offers clients a bit more confidence throughout the buying or selling process because they are required to uphold the Code of Ethics of the association and hold each other accountable to do the same.
Hopefully, this quick breakdown of common terms related to the world of real estate has been enlightening for you. If this is the first time you have bought or sold a home, it is very smart to get yourself acquainted with a handful of terms that will likely be thrown around every step of the way.
One important thing to keep in mind is that a great real estate agent should be available for you every step of the way. If you have questions about a specific term or phrase, don’t hesitate to ask your agent so that you can better understand what will come next in your home selling or buying journey.