Common Real Estate Terms Explained

Buying or selling a home can feel overwhelming—especially when the industry lingo starts flying. Whether you're a first-time buyer, seasoned investor, or somewhere in between, understanding the language of real estate can help you make smarter, more confident decisions. Here's a simple breakdown of the most common real estate terms you’re likely to encounter.

1. Appraisal

An appraisal is a professional estimate of a property's value, usually required by lenders before they approve a mortgage. It helps ensure the home is worth the amount you're borrowing.

2. Closing Costs

These are the fees and expenses paid at the end of a real estate transaction. They can include attorney fees, title insurance, taxes, lender charges, and more. Buyers typically pay 2–5% of the home's purchase price in closing costs.

3. Contingency

A contingency is a condition that must be met for a real estate contract to become binding. Common contingencies include financing (the buyer must get a mortgage), inspection (the home must pass an inspection), or sale of the buyer’s current home.

4. Earnest Money

This is a deposit made by a buyer to show they’re serious about purchasing the home. It’s usually held in escrow and applied to the down payment or closing costs if the sale goes through. If the buyer backs out without a valid reason, the seller may keep it.

5. Escrow

Escrow is a neutral third-party account where money or documents are held until certain conditions are met. In real estate, it's typically used to hold the buyer’s earnest money and to manage the transfer of funds during closing.

6. Home Inspection

A home inspection is a professional evaluation of a property's condition, including its structure, systems, and features. It helps the buyer understand potential issues before completing the purchase.

7. Listing Agreement

This is a contract between a homeowner and a real estate agent that gives the agent the right to market and sell the home. It outlines the listing price, agent’s commission, and the agreement’s timeframe.

8. Multiple Listing Service (MLS)

The MLS is a shared database that real estate agents use to list and find properties for sale. It’s where most online home listings pull their information.

9. Pre-Approval vs. Pre-Qualification

• Pre-qualification gives you an estimate of what you might be able to borrow based on self-reported info.

• Pre-approval is more official; it involves a credit check and verification of your financial documents. Sellers often prefer buyers who are pre-approved.
  
  

10. Title

The title is the legal right to own and use a property. A title search ensures there are no legal issues—like unpaid taxes or liens—that could affect the buyer’s ownership.

11. Under Contract

When a home is “under contract,” it means the buyer and seller have agreed to terms and signed a purchase agreement, but the sale hasn’t closed yet.

12. Closing

Closing is the final step in a real estate transaction. The buyer signs the mortgage documents, pays closing costs, and officially becomes the new owner of the property.

Final Thoughts

Real estate doesn’t have to feel like a foreign language. With these terms in your toolkit, you’ll be better prepared to navigate the process with clarity and confidence. And if you ever have questions—don’t hesitate to ask. The right guidance can make all the difference.