Real estate can be confusing, especially if you’ve never bought, sold, or made yourself familiar with the terminology before! I remember when I first started learning about real estate and investing, it took me a bit of time to catch onto the lingo (and heck, there’s still some things I hear that I don’t know!).
Buying or selling your home can be, and usually is, one of the biggest financial moves of your life! And I don’t want the terminology you hear through the process to scare you, stress you out, or confuse you!
So let’s get familiar with some of the most common terms in real estate:
Write: Filling out an “offer to purchase” contract to formally offer on a property.
Multiples: When you hear someone mention multiples in the world of real estate, they’re referring to multiple offers or more commonly, a bidding war. When a property receives multiple offers, it often drives the price up as each party tries to outbid the other. This is also common in fast-moving markets, where homes tend to sell quickly.
Earnest money: Earnest money is a deposit you put down when making an offer on a property. This money shows the seller that you are serious about your offer and are willing to put your money where your mouth is. The amount of earnest money you put down can vary, but it’s typically 1-2% of the purchase price.
Closing costs: Closing costs are the fees and expenses you pay when you finally close on a property. These costs can include things like the real estate agent’s commission, title insurance, and transfer taxes.
Inspection period: The inspection period is the time after you make an offer on a property, but before you actually close on it. This is typically a few days or weeks, and it’s during this time that you have the home inspected to make sure there are no major surprises.
Mortgage pre-approval: Mortgage pre-approval is when a bank or lender agrees to give you a loan for a certain amount of money, based on your credit score and income. This is different from a pre-qualification, which is just an estimate of how much you may be able to borrow.
Contingencies: A contingency is a condition that must be met before you can finalize your purchase of a property. Most common contingencies are for the home inspection and the mortgage approval. If either of these fall through, you can back out of the purchase without penalty.
Title search: A title search is a process where a lawyer or title company reviews all the public records related to a property to make sure there are no liens or other legal issues. This is an important step in buying a home, as it ensures that you won’t end up with any surprises down the road.
Buyer rep: A buyer rep is a real estate agent who represents you, the buyer, in a property purchase. This is different from a seller’s agent.
Listing agent: The listing agent is the real estate agent who represents the seller in a property transaction. They are responsible for marketing the home and getting it sold.
Pre-qualification: A pre-qualification is an estimate from a bank or lender of how much money you may be able to borrow for a home purchase. This is different from a mortgage pre-approval, which is when a bank agrees to give you a loan.
Debt to Income (DTI) ratio: Your Debt to Income ratio is a calculation of how much money you earn each month compared to how much money you owe. This is used by lenders to determine how much money you can afford to borrow.
Addendum: An addendum is a document that is attached to an offer on a property. This document can include things like a letter to the seller or proof of pre-approval.
Amendment: An amendment is a document that amends or changes an existing offer on a property. This can be used to update the terms of the offer, or to remove a contingency.
Counter: A counter is a formal offer to purchase a property, made in response to an existing offer.
Pending: A pending sale is a property that has been sold, but the sale has not yet closed.
Sold: A property is sold when the buyer and seller agree to the price and terms of the sale, contingencies are lifted, and the sale is finalized.
Expired Offer: An expired offer is a property where the buyer and seller could not agree on a price or the sale fell through for some other reason.
Expired Listing: An expired listing is a property where the seller put it on the market, but then took it off after not getting any offers that followed through.
REO: REO is short for “Real Estate Owned” and is typically used to describe a property that has been foreclosed on.
Active: An active property is one that is currently on the market and available for purchase.
Closing: Closing is the process of finalizing a property sale. This includes signing all the paperwork, getting the funds transferred, and taking possession of the property.
List price: The list price is the price that the seller is asking for their property.
Listing appointment: A listing appointment is when you meet with the seller’s agent to discuss putting their property on the market.
Disclosure: A disclosure is a document that the seller must provide to the buyer, which details any known problems with the property.
Short sale: A short sale is when the seller agrees to sell their property for less than they owe on it. This is often used as a way to avoid foreclosure.
Appraisal: An appraisal is a process where a third party reviews the value of a property. This is used to make sure that the price of the property is in line with the market value.
Seller finance: Seller finance is when the seller agrees to provide financing for the buyer. This can be a way to get around having to go through a bank.
Hard money lender: A hard money lender is a company that provides short-term loans to people who are buying or refinancing a property. Typically, they offer higher interest rates than a traditional lender.
Inspection report: An inspection report is a document that is compiled after an inspection of a property. This report will detail any damage or problems that the inspector found.
CMA: A CMA (Comparative Market Analysis) is a report that compares the prices of similar properties in the area. This is used by real estate agents to help determine the asking
Foreclosure: Foreclosure is when the lender takes back a property because the borrower was not able to make their mortgage payments. This process can take months or even years.
Lien: A lien is a legal claim that is placed on a property. This is used as a way to secure payment for something like a debt or a repair bill.
Mortgage: A mortgage is a loan that is used to purchase a property. The mortgage is secured by the property.
Title insurance: Title insurance is a policy that protects the buyer against any problems with the title of the property. This can include things like errors in the public record or title disputes.
Estate: Estate is another word for “property.”
Realtor: A Realtor is a person who is licensed to sell real estate.
MLS: MLS stands for “Multiple Listing Service.” This is a database of all the properties that are for sale in a particular area.
Broker: A broker is someone who is licensed to broker real estate deals. This means that they can act as the middleman between the buyer and seller.
These are just some of the most common real estate terms – but there are certainly many more!
Hopefully this helped give you a bit of clarification! Don’t worry if you don’t remember all or any of these terms. As your designated Edmonton REALTOR®, I’m always here to walk you through anything you don’t understand throughout the process!