Common Real Estate Terms
When you start navigating the real estate world, you start coming across different real estate terms that you may or may not be familiar with. No matter if you are purchasing/selling a property for the first time or you are a real estate investor, there are numerous confusing real estate terms used by real estate professionals.
Having said this, we don’t mean that these terms are important for the professionals only. In fact, being a home buyer or seller, you must have a good knowledge of all kinds of terminologies so that you can understand what your agent is actually referring to. This will also make your real estate process smoother while ensuring effective communication among parties.
Here are some of the basic real estate terms that everyone must understand to stay well informed and involved in the real estate transaction.
Real Estate Terms
Amortization – A process of paying off the loan or mortgage, comprising of principal and interest for the payments than just repayment of the interest first.
Assessed Value – It is the dollar value assigned to a house. It is assigned by the public tax assessor and is related to state/city taxes. This value is usually different than the one assigned by some private home appraiser.
Closing – The final meeting in which the real estate transaction or the property sale is completed. Sellers and buyers exchange funds and sign documents which are also known as a settlement.
CMA – Comparative Market Analysis which is also known as ‘comps’. You can take it as the report of different similar houses in a particular area that are either recently sold or still on the market. This report is used by the appraiser to determine the current fair market value of the property.
Earnest Money Deposit – This is an amount that is given with the offer. The buyer makes this payment to show to the seller that he/she is serious about purchasing the property. The amount is then counted in terms of down payment and in case, the offer is not accepted, seller returns the amount.
Escrow – This is an account that is set up by a lender to receive monthly payments from property buyers. This amount is then used to pay off expenses like taxes or insurance.
MLS – MLS stands for Multiple Listing Service. It is an organization that first collects and then distributes houses for sale information to the organization’s members. This data is then utilized to populate different home listing sites.
Point – A point refers to the 1% of the mortgage loan value. Any buyer can use this option to buy discount points. For this, they would need to pay additional money up front as an exchange for a reduced interest rate.
PMI – This stands for Private Mortgage Insurance. It is an insurance premium that is paid by buyers to lenders for lenders’ protection in case buyers fail to pay the mortgage. Once the buyer has 20% equity in the house, the insurance is then discontinued.