If you are new to the world of real estate, you may feel overwhelmed by the amount of jargon and acronyms that agents, lenders, and sellers use. To help you understand the basics, here are some common real estate terms and definitions that you should know.
1. Appraisal
An appraisal is an estimate of the market value of a property, based on its condition, features, location, and comparable sales. An appraisal is usually done by a licensed appraiser, who is hired by the lender to determine the loan-to-value ratio of the property. The appraisal helps the lender decide how much money they are willing to lend to the buyer.
2. Closing
Closing is the final step of the home buying or selling process, where the ownership of the property is transferred from the seller to the buyer. Closing usually involves signing a lot of paperwork, paying closing costs, and receiving the keys to the property. Closing can take place at an attorney’s office, a title company, or a real estate agent’s office.
3. Contingency
A contingency is a condition or clause in a purchase agreement that must be met before the sale can be finalized. Common contingencies include home inspection, appraisal, financing, and title. A contingency gives the buyer or seller the right to back out of the deal if the condition is not met or waived.
4. Down payment
A down payment is the amount of money that the buyer pays upfront for the property, usually as a percentage of the purchase price. The down payment reduces the amount of money that the buyer needs to borrow from the lender. The typical down payment for a conventional loan is 20%, but some loans may require less or more.
5. Earnest money
Earnest money is a deposit that the buyer makes to show their good faith and commitment to the seller. Earnest money is usually held in an escrow account until closing, where it is applied to the buyer’s down payment or closing costs. If the buyer backs out of the deal without a valid reason, the seller may keep the earnest money as compensation.
6. Escrow
Escrow is a third-party service that holds money or documents on behalf of the buyer and seller until the transaction is completed. Escrow ensures that both parties fulfill their obligations and protect their interests. For example, escrow can hold the earnest money, the title, and the deed until closing.
7. Fixed-rate mortgage
A fixed-rate mortgage is a type of loan where the interest rate and monthly payment remain the same throughout the loan term. A fixed-rate mortgage offers stability and predictability, as the borrower knows exactly how much they will pay each month. The most common loan terms for a fixed-rate mortgage are 15 or 30 years.
8. Home inspection
A home inspection is a thorough examination of the physical condition and systems of a property, such as the roof, plumbing, electrical, heating, and cooling. A home inspection is usually done by a licensed home inspector, who is hired by the buyer to identify any defects or issues that may affect the value or safety of the property. The buyer can use the home inspection report to negotiate repairs or price adjustments with the seller, or to cancel the contract if the problems are too severe.
9. Listing
A listing is a property that is for sale on the market, advertised by a real estate agent or a seller. A listing usually includes information such as the address, price, size, features, photos, and description of the property. A listing can be found on multiple listing services (MLS), online platforms, or print media.
10. Pre-approval
A pre-approval is a letter from a lender that states how much money they are willing to lend to a potential buyer, based on their credit history, income, assets, and debts. A pre-approval shows the seller that the buyer is serious and qualified, and gives the buyer an advantage in a competitive market. A pre-approval is not a guarantee of a loan, as the lender still needs to verify the buyer’s information and the property’s appraisal.
For personalized guidance in the Canadian real estate landscape, connect with Bonnie and Daniel Wan at 905-883-8888. Their specialized expertise ensures that your real estate journey seamlessly integrates with your goals, amplifying your likelihood of success and optimizing the returns on your venture. With a commitment to personalized service, they navigate the complexities of the market, providing insights tailored to your unique needs and aspirations.
-Bonnie Wan
References
78 Real Estate Terms and Expressions You Should Know | Zillow
136 Real Estate Terms and Definitions You Need to Know – The Close
Real Estate Vocabulary 101 (50+ Terms to Know) – Under 30 Wealth