Whether you're a first-time homebuyer or a seasoned participant in real estate transactions, the terminology used by your agent can sometimes feel unfamiliar. Agents may inadvertently use industry jargon without providing explanations, leaving you scratching your head. To ensure clarity, here are 15 fundamental definitions of terms your agent is likely to use during your home buying journey:

 

Appraisal: A report prepared by a qualified third party estimating the value of the property. It serves the buyer and their lender by ensuring the property's value aligns with the purchase price.

 

Association Fee / HOA Fee: Monthly fees, in addition to your mortgage, required by certain housing communities like condos and townhomes. These fees cover the maintenance of common areas and amenities.

 

Closing Disclosure / CD: A standardized form itemizing all costs, fees, and fund distributions involved in the transaction between buyer and seller.

 

Closing Costs: Expenses incurred by both buyers and sellers in addition to the home's purchase price. This includes fees for obtaining a new loan for the buyer and commissions for real estate agents for the seller.

 

Collateral: Valuable assets, such as your home, held to ensure repayment of a mortgage or loan.

 

Comparables: Recently sold homes in the area with similar features, used to estimate the value of homes in the vicinity.

 

Contingencies: Conditions that must be met, such as home inspection or loan approval, within a specified timeframe. Failure to satisfy contingencies may result in contract cancellation.

 

Counteroffer: The seller's response to the buyer's offer.

 

Earnest Money: Deposit submitted by the buyer to the seller upon making an offer. Held in trust by a third party, it demonstrates the buyer's seriousness about purchasing the property.

 

Escrow: Funds, like earnest money, held by a third party until the transaction is completed. It also refers to the period from contract acceptance to home sale completion.

 

Principal: The initial amount borrowed in a loan, exclusive of interest charges.

 

REO (Real Estate Owned): Properties foreclosed by financial institutions like banks, which now own them.

 

Short Sale: A situation where the seller's lender agrees to accept an offer for less than the mortgage amount owed.

 

Title: Legal documentation confirming ownership of the property, including ownership history and transfers, often referred to as a Title Deed.

 

Underwriting: The evaluation process for potential homebuyers' financial ability to secure and repay a loan. It involves credit checks and property appraisals.

 

Understanding these fundamental real estate terms will empower you throughout the home-buying process, ensuring clarity and informed decision-making.