Top Real Estate Terms Explained
Are you looking to buy or sell a home in the Greater Salt Lake area and can’t quite wrap your head around all of the real estate jargon? We totally get it. Sometimes realtors can get so caught up in their slang (guilty!) that they don’t realize their client is completely lost.
Well, we’re here to help! Here is a cheat sheet for various common terms thrown about in the real estate world. Read it. Study it. Become it. You’ll be a pro in no time!
An appraisal is an opinion of value for real property. Home appraisals are typically performed by an authorized professional (an appraiser) and take about 20 minutes for the physical walk-through and up to 14 days to create the appraisal report. Receiving an appraisal is an important part of any buyer’s financing process and will help determine the amount your mortgage company is willing to loan.
Basically, this means you get what you see. A property marketed “as is” usually indicates that the seller is unwilling to perform most (if not all) repairs. Often, these homes need some TLC and will compensate with a lower listing price.
Also, “as is” is contingent on the time the offer was written. If something were to happen to the property from the time the offer is written to closing time—say, there’s a freak wind storm and a tree falls over on a fence (Yes, sometimes that can happen here in the Greater Salt Lake area)—then the property is no longer in the same “as is” condition. In this scenario, the seller is expected to restore the property back to “as is” condition, or release the buyer from their contract.
Covenants, Conditions & Restrictions (CC&Rs)
What, what, and wha? Let’s break it down. Usually, there are rules and regulations placed on a property by a homeowner’s association (HOA) or possibly by a PUD or city. The CC&Rs share what requirements and limitations there are for the homeowner of that property. So, consider CC&Rs the real estate commandments for your particular property.
Long story short, these are fees that you have accrued over your buying or selling journey. Generally, the cost is around 3-6% of the purchase price of the home and is due at closing (hence, closing costs). This is when you’ll pay your agent commissions, the title company, attorneys, HOA fees, and more. Below are some of the most common fees you’ll see included in your closing costs:
Lender, title company, attorneys, insurance companies, taxing authorities, HOA, Realtors, etc.
Pro Tip: In a “Buyer’s Market,” many sellers will pay a percentage of the closing costs. However, in a “Seller’s Market,” buyers are expected to cover them on their own.
This one is pretty simple. This initial payment when closing on a home purchase can range anywhere from 3% to 20% to 99%—and how much you put down will affect your mortgage payment (depending on your loan type). So make sure you connect with your lender about which loan and which downpayment is right for you.
This is the period of time where buyers roll up their sleeves and do some research before really committing to their new home purchase. They perform inspections and tests on the property—and based on what they find, some buyers will attempt to renegotiate the contract. Or, they can walk away altogether.
Earnest money—sometimes known as a “good faith deposit”—is a certain percentage that buyers will put down when writing an offer to show the seller that they are serious about purchasing. (Think of it this way: If buying a house were a game of poker, this is when you decide to throw in some chips so the other players know you’re ready to throw down.)
Earnest money can be refunded before a specific deadline if the buyer chooses to back out for any reason. But once you hit that deadline—or you offer hard earnest money (meaning, no refund whatsoever)—then the money belongs to the seller. These funds can add up to 1-5% of the listing price.
Ah, yes. The magic words in any growing market. This is the investment a homeowner has in their home. The math is pretty simple—take the market value of your home and subtract your mortgage(s) from the property. Boom! The amount leftover is the equity you have in your home. So, if you sold your home and decided to travel the world, that equity amount is what you can pocket and take away with you.
“Escrow” is a fancy term for “safety deposit box”. They are the third party who collects all money, instructions, documents, and personal property until a specified date. This date is confirmed by both the Buyer and Seller beforehand. In Utah, we use Title Companies that employ Escrow Officers that work as our Escrow Holders.
This is when the lender takes possession of a mortgaged property if the payments cannot be made. (Moral of the story, do your best to keep up with your mortgage. Foreclosures aren’t fun.)
Home Sale Contingency
This is when a buyer lets the seller know that the purchase of the seller’s property relies on the sale of the buyer’s own home. That’s not really a big problem in a seller’s market, but it can be in a buyer’s market.
However, there is a similar contingency for sellers as well—if a seller cannot purchase a home in a given amount of time, then they can back out of their sale. This is SO important in a seller’s market, so let’s break that down:
If you—the seller—don’t want to sell your home until you’ve found one to purchase, you can include a “home sale contingency” in your contract that will indicate to potential buyers that YOUR sale completely depends on whether or not you can find your next home.
Pro Tip: A lot of people worry about selling their home in this market because they don’t think they’ll find a new one in time. Add this clause to any contract and—boom—you’re covered.
Multiple Listing Service (MLS)
This is the “hub” where agents and brokers gather to share secrets – Erm, we mean it’s a database that allows real estate professionals access to properties for sale in the area. Seller’s agents will use it to advertise their listings, and buyer’s agents will scour the site for potential homes for their clients.
The Roxburgh Group uses the Wasatch Multiple Listing Service and the Park City Multiple Listing Service.
You know when you had to get your parents to sign permission slips before going on a field trip? Well, this is the adult version of that with your lender. This letter is important because it lets sellers know that you are a qualified buyer. It also identifies the terms, loan type, and amount that the buyer can afford. (This is all determined by the lender checking their debt-to-income ratios, credit history, and available cash.)
It’s SO important that you get pre-approved before researching houses. A) It gives you a better insight so you know what you can afford, and B) It shows sellers that you are serious about their home and can back up your solid offer.
In this situation, rent-back (or leaseback) is when a buyer allows the seller to remain in the home after closing for a determined period of time. They come to these certain terms before closing and it often involves a lease deposit or a rental rate.
This is a document you get from the seller that addresses any information about the property that could affect a buyer’s decision. So really, it shares any dirty secrets about the property. From pest problems to construction projects, this document *should* disclose it all.
In a short sale, the property is being sold for just “short” of the amount owed on the house. A lender must agree to a mortgage payoff amount that is less than the original mortgage. This is mainly for people who can’t afford their homes anymore, and the only way they can get close to paying off the mortgage is if the lender agrees to accept a smaller amount.
Pro Tip: Setting up one of these bad boys will take forever. So, try to avoid it if at all possible.
Remember, the best way to get on top of this market is with an experienced real estate agent. If you find the right one, it should be a breeze navigating contract jargon.
Contact The Roxburgh Group today to set up an appointment with one of our top-tier agents!