Real Estate Terms every Buyer & Seller need to Know

How many of these real estate terms do you know? 

Adjustable-rate mortgage (ARM)

A mortgage where the interest rate can change at set times and for set amounts over the course of the loan. 

Amortization

The schedule for making monthly mortgage payments showing how much interest and principal is contained in each payment. 

Appraisal

A third-party assessment of a property's value. Lenders require appraisals to ensure the property is worth the amount being financed. 

“As is”

While all property is sold in its current condition, this term indicates that the seller does not intend to make any repairs or improvements, nor offer concessions for for repairs or improvements.

Buyer's agent

A real estate professional who helps buyers find a home at the terms most favorable to them as a service for a fee. They have a fiduciary responsibility to protect their client’s interests. 

Cash to close

Total of the closing costs, down payment and impounds a buyer will pay at settlement on the home. This does not include fees paid for inspections or a survey.

Closing costs

An assortment of fees paid at the close of a real estate transaction. They can include fees to lenders, attorneys, insurance, taxing authorities, home owners associations, title companies, real estate firms, and other settlement services. 

Comparable

A term used to describe recently sold properties that are similar to the property being evaluated. To be used in an appraisal, a home must have sold in the last 6 months. 

Contract

A legally binding agreement between the buyer and seller that outlines the specifics of the transaction. The standard NC contract from the NC Bar and NCAR is 17 pages. 

Days on market (DOM)

The number of days a home is, or has been, listed for sale on the MLS and not under contract.

Down Payment

The amount of money a lender requires the buyer to invest in the home at closing, typically a percentage of the purchase price of the home. This is part of the cash to close, but separate from closing costs. 

Due Diligence Fee

A negotiated fee buyers pay directly to the seller when the house goes under contract. Typically non-refundable but does count towards the purchase price of the home. 

Due Diligence Date

The day when the buyer's right to terminate the contract ends, at 5:00 PM. 

Earnest money deposit (EMD)

A deposit made by the buyer to a third party (often an attorney) who holds the funds during the transaction. If after the due diligence date the buyer is unwilling or unable to close, this deposit goes to the seller. If the deal is terminated before the due diligence date, the buyer is contractually entitled to the return of this deposit.

Escrow

Funds held by a third party for a purpose. (1) During the sale of a home, earnest money deposits are held “in escrow” by a third party. (2) For mortgages, besides the principal and interest, there are additions paid monthly by the borrower to an escrow account to pay annual home owners insurance and property tax. The mortgage holder controls this account on behalf of the borrower. 

Excise Tax

A tax paid to the county registrar when a property is conveyed to a new owner. Also called “revenue stamps,” it is typically paid by the seller and is $1 for every $500 of value of the property. 

Fixed rate mortgage

A mortgage where the interest rate cannot change over the course of the loan. 

For Sale By Owner (FSBO)

Sellers who opt to sell their home without the assistance of a Realtor. This is a lot of work for the owner who may or may not know the law. Often it is a frustrating experience for everyone. 

Flood Plain 

An area where flooding has, or is likely to, occur which can impact the sale of a property. Lenders require flood insurance on buildings in a flood plain to obtain a mortgage on the property. 

Homeowner's association (HOA)

A private association of all home-owners in a community that oversees the community or condominium complex and enforces community rules. When you purchase a property with an HOA, you agree to abide by the HOA’s restrictive rules and pay the HOA dues. Often the HOA board will hire a management company to do most of this work and frustrate the home owners. If owners do not pay the dues, the HOA can put a lien on the property. 

Inspections

Investigations into the condition of a property paid for by buyers. Typically done during the due diligence period and may include home, radon, termite, HVAC, well, septic and pool inspections. 

Listing Agent

A real estate professional who helps sellers list their home and sell it at terms most favorable to them as a service for a fee. They have a fiduciary duty to protect their client’s interests. 

Material Fact

Any information about a property that could impact a reasonable person's decision to buy, sell, or lease it. Real estate brokers are required to disclose material facts to all parties involved in the transaction. 

Multiple listing service (MLS)

A regional service realtors pay for where homes for sale are listed. The MLS distributes the listings to other websites so buyers and sellers can find the information in many places.

Pending

A status of a sale that indicates an offer on a property has been accepted, but the sale is not yet final. In “the 919,” you may also see “active but contingent” or “contingent sale” on some websites because NC is confusing, but they all mean the home is under contract. 

Planned Unit Development (PUD)

The legal description of a neighborhood or area that has a Home Owners Association. 

Pre-approval Letter

A letter from a mortgage lender indicating the buyer has the financial ability to purchase a specific property.

Proof of Funds (POF)

This demonstrates to the seller that the buyer has sufficient funds to pay cash for the property. 

Settlement

The time when all paperwork has been signed, all funds transferred for the purchase and the mortgage company has signed off on the transaction. After this the deed is recorded with the county, and the transaction is considered “closed.” 

Survey

A detailed map of a specific property identifying boundaries and the location of structures as well as easements and flood plains. 

How many did you know? Let us know if you found any of these definitions helpful, funny or confusing.  For more help understanding real estate terminology, contact 919 Realty Group.