Understanding Common Real Estate Terms

Buying or selling a home can be exciting, but it can also feel like learning a new language. From "contingent" to "escrow," real estate comes with plenty of industry terms that may leave buyers and sellers scratching their heads. Understanding a few of the most common terms can help you feel more confident throughout the process.

Pre-Approval

A pre-approval is a letter from a lender indicating how much money you may be qualified to borrow for a home purchase. It helps buyers understand their budget and shows sellers that a buyer is serious and financially prepared.

Listing

A listing is a property that is actively being marketed for sale. When a homeowner decides to sell, their real estate agent creates a listing that includes details about the property, photos, pricing, and other important information.

Offer

An offer is a buyer's proposal to purchase a property. The offer typically includes the purchase price, financing details, contingencies, and proposed closing date.

Contingency

A contingency is a condition that must be met before a real estate transaction can move forward. Common contingencies include financing, appraisal, home inspection, and the sale of a buyer's current home.

Under Contract

When a property is under contract, the seller has accepted an offer, but the sale has not yet closed. The transaction is still moving through inspections, financing, appraisals, and other required steps.

Pending

Pending means most contingencies have been satisfied and the transaction is nearing the closing table. While the sale is not yet final, it is typically in its final stages.

Earnest Money Deposit

This is a deposit made by the buyer when submitting an offer. It demonstrates the buyer's commitment to purchasing the property and is typically applied toward closing costs or the purchase price at closing.

Home Inspection

A home inspection is a professional evaluation of a property's condition. Inspectors look for potential issues with the home's structure, roof, plumbing, electrical systems, and more.

Appraisal

An appraisal is an independent estimate of a home's market value. Lenders often require an appraisal to ensure the property's value supports the loan amount being requested.

Closing Costs

Closing costs are expenses associated with completing a real estate transaction. These costs may include lender fees, title fees, taxes, insurance, and other transaction-related expenses.

Escrow

Escrow refers to a neutral third party that holds funds and documents until all conditions of the transaction have been met. This helps protect both buyers and sellers during the process.

Title

A title represents legal ownership of a property. Before closing, a title search is typically completed to verify ownership and identify any potential issues that could affect the sale.

Closing

Closing is the final step in the home buying or selling process. This is when documents are signed, funds are transferred, and ownership officially changes hands.

Whether you're buying your first home or selling your fifth, understanding common real estate terms can make the process feel much less overwhelming. Having a knowledgeable real estate professional by your side can also help answer questions and guide you through every step of the journey.