Real Estate Terms Made Simple: What Buyers and Sellers Should Know
Whether you're buying your first home or listing your current one, real estate can feel like learning a whole new language. Don’t worry—I've got you! This guide breaks down the most common real estate terms so you can feel confident every step of the way.
1. Pre-Qualification
What it means: A lender reviews your financial information (like income, debt, and credit) to give you an estimate of how much home you can afford.
Why it matters (for buyers): This is your first step toward buying a home. It helps you set a realistic budget and shows sellers you're financially ready.
Why it matters (for sellers): When evaluating multiple offers, a pre-qualified buyer is more serious and prepared—reducing the risk of a deal falling through.
2. Earnest Money
What it means: A deposit made by the buyer when submitting an offer to show they're committed to the purchase.
Why it matters: It’s typically held in escrow and later applied to closing costs or the down payment. If a buyer backs out without a valid reason, the seller may keep it.
3. Escrow
What it means: Escrow has two meanings in real estate:
- During the transaction, it refers to a neutral third party holding funds and documents until closing.
- After closing (as part of your mortgage), escrow is an account used to pay property taxes and homeowners insurance. Your lender collects this monthly and pays the bills on your behalf.
Why it matters: If taxes or insurance rates increase and your escrow account is underfunded, your mortgage payment may increase to make up the difference.
4. Contingency
What it means: A condition in the contract that must be met for the sale to proceed—like financing, inspections, or an appraisal.
Why it matters: In Leon County, the contingency period is often 15 days, but it can vary depending on the terms of the contract. This window is critical—buyers should complete inspections, appraisals, and any due diligence during this time. Sellers should be aware that buyers may cancel the contract if contingencies aren’t satisfied.
5. Appraisal
What it means: A licensed appraiser determines the fair market value of the home, usually on behalf of the buyer’s lender.
Why it matters: If the home doesn’t appraise for the agreed-upon price, the lender may not finance the full amount—potentially leading to renegotiations or contract cancellation.
6. Closing Costs
What it means: These are the various fees paid at closing, including lender fees, title work, insurance, taxes, and recording fees.
Why it matters: Typically 2–5% of the purchase price, closing costs are paid by buyers, sellers, or both—depending on the contract.
7. Home Inspection
What it means: A professional inspector examines the home for issues with the roof, foundation, HVAC, electrical, plumbing, and more.
Why it matters: A home inspection protects buyers from unexpected repair costs and can open the door for renegotiation or repairs.
8. Title Search
What it means: A legal review of the property’s history to make sure there are no liens, ownership disputes, or other issues.
Why it matters: A clean title ensures the seller has the legal right to transfer ownership. Most lenders require title insurance to protect against future claims.
9. Under Contract / Pending
What it means: A seller has accepted a buyer’s offer, and both parties are working through inspections, financing, and closing tasks.
Why it matters: The home isn’t officially sold yet—but it's off the market and in process. Deals can still fall through at this stage due to financing or failed contingencies.
10. Closing Day
What it means: The final step in the transaction where all documents are signed, funds are transferred, and ownership officially changes hands.
Why it matters: For buyers, it means you get the keys. For sellers, it means your sale is finalized—and it’s time to celebrate your next chapter!
Buying or selling a home is a major life decision, and you deserve to feel informed and confident along the way. I’m here to help you understand every term and every step—because real estate should feel empowering, not overwhelming.
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