Common Real Estate Terms Defined

Please Note: I am licensed in NC so some of the information may be specific to NC. You should always consult a licensed professional in your area. If you need help finding a licensed real estate professional in your area click here and I will refer you to someone in my network.

Let’s face it, real estate can be a little confusing. It’s easy to forget that not everyone knows what you are talking about when you start to throw out super fancy real estate slang. So I’ve decided to be your personal real estate slang translator.

22 REAL ESTATE TERMS THAT WILL TURN YOU FROM A REAL ESTATE NEWBIE TO A TOTAL REAL ESTATE BADASS

Real Estate

Quick Translation: Refers to a house and the land that the house is on.

In-Depth Translation: When people think of Real Estate, they are envisioning a house. Real Estate is so much more than a house. The term refers to the land and the physical improvements on that land. The most common types of real estate are residential, commercial, industrial, and land

Real Estate Agent

Quick Translation:  This is someone who can help you with your real estate transaction. 

In-Depth Translation:  A Real Estate Agent is a person who helps people buy, sell, manage, and invest in real estate.

A Real Estate Agent acts as your guide and counselor along your real estate journey. Working with an agent can help you better position yourself to either buy or sell your home because they have in depth knowledge of the market.

Realtor

Quick Translation:  A real estate agent with a higher standard of ethics.

In-Depth Translation: The term Real Estate Agent and Realtor are often used interchangeably by people because they don’t know the difference. However, all Realtors are Real Estate Agents but not all Real Estate Agents are Realtors. If that’s a little confusing keep reading.

What makes a Realtor different from a Real Estate Agent is that a Realtor has agreed to adhere to a strict code of ethics outlined by the National Association of Realtors.

The Realtor designation is one of the highest designations you can have as a Real Estate Agent. In fact, to gain access to the Multiple Listing Service (MLS), Real Estate Agents have to become Realtors.

Listing Agent / Selling Agent

Quick Translation: Helps people sell their houses.

In-Depth Translation:  The listing agent, also called the selling agent, is the agent representing the seller in the real estate transaction.

In North Carolina, all agents represent the seller. Only when you as a buyer make an agreement with the agent for them to represent you as a buyer’s agent do they then work for you.

If you are confused about whose interest a real estate agent is serving, ask them – “Are you working as an agent for the seller or are you working as my agent”? If they don’t come out and say that they are your agent, be very careful with how much information you share them.

Buyer’s Agent

Quick Translation:  Helps people buy real estate.

In-Depth Translation:  The buyer’s agent is the agent representing the buyer in the real estate transaction. Make sure you have either an oral or written agreement with your agent expressly stating that they are representing you as the buyer. Otherwise, they may be technically representing the seller.

Most real estate agents require that you sign an exclusive buyer’s agreement with them. Now don’t freak out. I know most of us don’t actually like signing contracts. But, I want you to keep in mind that real estate agents don’t get paid unless you actually buy a house. It’s a lot of upfront work for something that may not happen. Signing an exclusive buyer’s agreement lets the agent know that you are serious about buying a house and helps ensure that they get paid if you choose one of the houses they show you.

Agency Contracts

Quick Translation:  Contracts used in real estate transactions.

In-Depth Translation:  Agency contracts help establish the relationship between the real estate agent and the people who employ them as well as outlines terms and conditions.

The five types of agency contracts used in real estate transactions are:

  • Listing Contract: Contract between the seller of a home and a real estate agent/realtor that outlines terms and conditions for selling a home.
  • Buyer Agency Contract: Contract used by buyers to employ real estate agents when searching for properties to buy.
  • Contract to Procure Tenant: Contract used when a property owner enlists the help of a real estate agent to locate a tenant for their property.
  • Property Management Contract: Contract used when a property owner enlists the help of a real estate agent to locate a tenant for their property as well as outlin how the real estate agent will perform ongoing services connected with the operation of the rental property.
  • Tenant Representation Contract: Contract used when a tenant wants to use a real estate agent to help them find a property to rent.

MLS – Multiple Listing Service

Quick Translation: Big database real estate agents use to exchange info on properties in their market.

In-Depth Translation:  MLS stands for Multiple Listing Service. This is a nationwide system that real estate agents use to exchange information about properties. The MLS is actually comprised of around 800 small MLSs. This means that it has access to hyper-local information about your housing market.

Nothing makes a realtor’s eyes roll harder than someone saying, “…but Zillow said my house is worth..”. The truth is, is that we don’t care what those other sites are saying. The MLS is one of the best resources for accurate up to date information for a property which is vital when it comes to crafting a selling price or creating an offer to present to a potential seller.

I had a client that started their search online which is great because she found a condo that she was interested in buying. Online the house stated the price was around $110,000. When I went into the MLS to do a little research the price was actually listed as $100,000, not $110,000. I called the real estate agent who was listing the property to confirm the price. The real estate agent confirmed that the price was, in fact, $100,000. In this instance, it seems like the change hadn’t updated on the online site she was using when she did her search. Imagine if she would have called him asking about that property? He would have been under no obligation to tell her about the $10,000 reduction.

Foreclosure

Quick Translation: Homes being sold as a result of the property owner defaulting on their loan.

In-Depth Translation:  Foreclosed homes are also known as Real Estate Owned (REO) or bank owned properties. Foreclosures happen when someone defaults on the loan for their home. In this situation, the lender makes the decision to take back the property and put it up for sale to the public.

Short sale

Quick Translation: When a home is sold at a price that is less than what it is worth.

In-Depth Translation:  A short sale happens when someone is trying to sell their home but the amount they owe is more than what the house is worth. In this instance, the lender has agreed to let them sell the house for the lower amount. Like a foreclosure, the short sale process can be long and stressful. Make sure your agent has experience when dealing with short sales.

CMA – Comparative Market Analysis

Quick Translation: Helps real estate agents determine market value for a home.

In-Depth Translation:  CMA stands for Comparative Market Analysis. CMAs are done to help sellers know how to price the home and to help buyers figure out how much they should expect to pay for a home.

Real estate agents take properties that have sold within the last 3-6 months that are of similar size, number of bedrooms, number of bathrooms, etc and then work out the averages to come up with a price for the home.  Of course, other factors come into play for the sale price of a home but a CMA is a tool that real estate agents use most often.

HOA – Home Owner’s Association

Quick Translation:   A governing body over a subdivision tasked with setting and implementing rules for the subdivision.

In-Depth Translation:  A Home Owner’s Association (HOA) is an association formed by the real estate developer of the subdivision for the purpose of managing the properties in that subdivision.

HOAS are comprised of the people who live in your neighborhood. Some people love them and others hate them.

The purpose of the HOA is to make sure that the standards of the subdivision are being upheld by every homeowner. They can govern things like what type of grass you can have in your yard, the type of fences you can put up and so much more. They also maintain common amenities of the subdivision like playgrounds or pools.

HOAs have a fee that you pay monthly or yearly. When you are buying a home, make sure you know if there is an HOA and ask to see the HOA bylaws and guidelines. You want to see what the HOA covers and allows in your neighborhood. For example, let’s say you raise chickens. If the HOA has a restriction against homeowners for that subdivision raising chickens, you will not be allowed to do it.

If you do not adhere to the rules and regulations, you will most likely receive a warning and then a monetary fine. Now it’s easy to ignore these fines but you must take them seriously. An HOA has the authority to place a lien on your property which can hurt you later on when you try to sell it.

Lien

Quick Translation:   A claim against a property.

In-Depth Translation: A lien is a claim against a property for payment of a debt. When you are trying to buy a house you should get a title search done. This is where you would uncover issues like liens. To receive a “clear title”, all liens must be paid in full.

Encroachment

Quick Translation:   When the rights of one property intrude on the rights of another property.

In-Depth Translation: An encroachment in real estate is generally not a good thing. It is when the rights of one property are violated by an intrusion from another property. The best way to explain what an encroachment is to give you an example.

Let’s say you have two homes side by side and one of the homeowners decides to get a fence put up on their property without getting any inspections to see where their property line begins and ends. Now let’s say the neighbor decides to sell their house and the buyers for that house get a survey done and discovers that the fence you put up is actually on part of what should be their property. This is what is known as an encroachment.

Due Diligence Period and Fee

Quick Translation: A period of time the house is taken off the market so that buyers can do their inspections.

In-Depth Translation: In NC we have what is known as a due diligence period and a due diligence fee (I’m not sure what other states have this). The due diligence period is a period of time where buyers can conduct necessary inspections. There is a fee associated with the due diligence period and it is nonrefundable. It helps to show sellers that you are serious about the home and helps compensate them a little for taking the home off the market.

There is no set amount you have to give for the due diligence fee. If you are the buyer you are trying to give as little as possible and if you are the seller you want a reasonable amount for the due diligence fee because as the seller, this is a fee you get to keep whether the person buys the house or not.

Earnest Money

Quick Translation: Money you give to the seller to show them that you are serious about buying their home.

In-Depth Translation:  Earnest money is money that the buyer gives to the seller in good faith.  Now when I say, “give to the seller”, you aren’t actually going to give them this money. Rather, you will let a third party handle this money.

Earnest money shows that you are serious about buying the property. Unlike the due diligence fee, the earnest money deposit is refundable if the buyer decides not to go through with the transaction within a specified time period (the due diligence period).

Down Payment

Quick Translation: Money used to help secure the loan for a home.

In-Depth Translation: The down payment is the amount of money you put down (give to the lender) up front when purchasing a home. This money is held in escrow until you close on the property.

“Earnest money” and “down payment” are not the same thing and the terms can be a little confusing. Remember, earnest money is money that you give to the seller and the down payment is money paid to the lender as part of the loan.

Escrow

Quick Translation: When your money is set aside for some future interest in Real Estate.

In-Depth Translation: Having an escrow means that a third party will hold monies in an account for you until a specified time. The escrow account helps protect parties involved in a transaction because no one side has access to the money. It also ensure that the money needed for things like property taxes are available when you need them.

Closing & Closing Cost

Quick Translation: Costs associated with the purchase of a home.

In-Depth Translation: :A closing is the last thing that happens once all terms have been met by the buyers and sellers for that home. Buying and selling a home comes with a lot of fees associated with it. Buyers and sellers are given a settlement sheet at closing. The settlement sheet shows the costs associated with the sale of that home. Some of these fees may include but are not limited to the following:

  • prorated property taxes
  • lender’s fees
  • appraisal cost
  • homeowner’s insurance

Everything and I mean everything that has to do with money for the transaction of the home will be on the settlement sheet.

FHA Loan – Federal Housing Administration Loan

Quick Translation: Type of loan used to buy real estate.

In-Depth Translation: The FHA Loan is a mortgage backed by the Federal Housing Administration. This is a popular loan because it allows people to buy or refinance a home with a low down payment and has flexible guidelines.

VA Loans

Quick Translation: Type of loan used to buy real estate that only active military or veterans can use.

In-Depth Translation:  This is another government-backed loan for veterans or people serving in the military. This is a flexible type of loan with great guidelines like lower Annual Percentage Rates (APRs). If you are serving in the military or have served in the military and are looking to buy a home, this is the type of loan you should go for.

Conventional Loan

Quick Translation: Type of loan used to buy real estate.

In-Depth Translation:  This type of loan is not government backed. The requirements for this type of loan are a lot stricter and you will have to have more money as a down payment.

PMI – Private Mortgage Insurance

Quick Translation: Insurance for your lender.

In-Depth Translation:  Private Mortgage Insurance (PMI) is insurance that lenders place on a mortgage. It serves as protection for them in case you default on your loan. The amount of PMI you pay will depend on many factors such as your down payment amount.

And there you have it my friends, a list of the most commonly used real estate terms.

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a girl's guide to real estate terms
common real estate terms

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