6 Real Estate Terms Everyone Should Know

Real estate can be intimidating. Whether you’re buying a house or looking to get into the business yourself, there are a lot of industry terms and buzzwords that you might not know and feel intimidated by. Don’t be. We’re here to give you a crash course of real estate terms you should know.

Appraisal

An appraisal is an estimation of a home’s current market value. During the home sale, the mortgage lender sends out an appraiser to get a professional opinion of the value of the property. This helps the lender decide if the property is worth the amount of the loan the potential buyer is seeking. It can include everything from the current local housing market and how much comparable properties have sold for, square footage, number of bedrooms and bathrooms, the overall condition of the house, and even the landscaping.

Closing

Closing is the final step in buying a house. It’s when the deal is considered final. Depending on where you live, recording the deed with the county clerk’s office is the true final step of closing, but generally it is when all parties’ signatures are on all required documents, money has been exchanged, and a lender’s full approval has been given if one is involved. Once this is complete, the buyer is given full access to the property they’ve purchased and is considered the new homeowner.

Due Diligence Period

This is a period of time between an accepted offer and closing on a house where the seller agrees to let the buyer inspect the property before closing the sale. It’s designed to let you, the buyer, get a good look at the property and ensure you’re getting the best deal possible. You might have anywhere from a week to a month to complete your due diligence – the agreed upon times vary by state and seller.

Equity

The investment a homeowner has in their home, it’s important to build equity as homeowners can leverage it as a financial asset to obtain loans for home repairs, paying off high interest debt, and more.

The way you calculate equity is by subtracting the amount you owe on all loans you have on your house, including your primary mortgages, home equity loans, and unpaid balances on home equity lines of credit, from its appraised value.

Homeowner’s Insurance

Homeowner’s insurance is a form of property insurance that covers losses or damages to someone’s residence. It covers both exterior and interior damages, loss or damage of personal belongings, and can also provide liability coverage against accidents that might happen in the home or on the property.

Purchase Agreement

A purchase agreement is a legally binding agreement between the buyer and seller. It outlines and defines the key details of the transaction and the conditions under which the sale will occur, so it’s important to make sure that this contract is ironclad. A purchase agreement may also be referred to as a real estate sales contract, home purchase agreement, real estate purchase contract, or house purchase agreement.

Have a better understanding of real estate terms? Maybe this knowledge will make you feel ready to kickstart your own real estate career. Sign up for our classes and get your license now!