Vocabulary For First Time HomeBuyer

Realtors often find that new or potential clients, especially first time homebuyers are bombarded with information about the process. The following guide is a glossary of important real estate terms you may or may not have heard before. Having a functional knowledge of the following terms will put any first-timer at the head of the class. 

  • Acceptance: When all parties sign the agreement of sale
  • Addendum: An attachment to the original agreement of sale that includes additional terms that were not outlined in the original agreement.
  • Agency: The relationship between buyer, seller and agent/s. 
  • Appraisal: The determicaned value of real estate based on the location, age, condition, current market supply and demand among other factors. 
  • Buyer’s Agent: The licensee that represents the buyer in a real estate transaction.
  • Clear to Close: The approval from the buyer’s lender that the buyer has gotten their mortgage loan approved and can close on the property. 
  • Closing Costs: Fees, taxes, and other costs the buyer and seller have to pay at closing.
  • Closing Disclosure: A statement issued by the mortgage company, prepared by an attorney, including all the details and fees for both buyer and seller at closing. 
  • Contingency: A real estate contract can be contingent on a factor/s for instance: a home inspection contingency. The sale is dependent  on a home inspection as defined in the contract. If major defects are found and the buyer and seller can’t find common ground on the repairs, the buyer can legally walk away with no financial consequences. 
  • Conveyance: When the deed is officially delivered from seller to buyer.
  • Deed: A signed and delivered legal document regarding ownership of property rights.
  • Disclosures: Documents regarding the state of the property.
  • Earnest Money/Good Faith Deposit: Money that is put down by a buyer towards the real estate transaction.
  • Escrow Account: The account in which earnest money/good faith deposits are held. 
  • Home Inspection: An inspection that occurs following the acceptance of an offer. The home inspector will look for all major defects and maintenance issues of the home to make sure all systems are functional. The home inspector will provide a detailed report regarding the home systems along with suggested repairs and maintenance.
  • Listing/Seller’s Agent: The real estate professional representing the seller in the transaction.
  • Multiple Listing Service (MLS): The online portal for realtors used to access all listings in a particular geographic area.
  • PITI: Principal, interest, taxes, and insurance when added equal the total monthly mortgage payment. 
  • Pre-approval: A document that serves as a verification of your creditworthiness from a lender. This document is submitted with an offer to prove to the seller that you will be able to pay for the home. Pre-approval letters also serve as a way to determine your price range as the lender will have done a deep dive into your financials (including looking at your credit report) to determine that number.
  • Private Mortgage Insurance: Insurance that a borrower is required to pay if they take out a mortgage with less than 20% down. This is often referred to as PMI.
  • Settlement Assistance: When a seller puts money towards a buyer’s closing costs. 
  • Settlement/Closing: The final step in a real estate transaction. This usually happens with an attorney present when the buyer and seller sign all documents and the deed is delivered.
  • Transfer Tax: A state/local tax on the sale of real estate. Transfer taxes are usually split between buyer and seller unless you are buying new construction. With new construction the buyer typically assumes the financial responsibility of the transfer tax.