Real Estate Terms

Here are some commonly used real estate terms that you may or may not know the meaning of. Now you will understand what everyone is talking about!

1.) Appraisal - A written justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby.

2.) Closing Costs - Closing costs are separated into what are called "non-recurring closing costs" and "pre-paid items." Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. "Pre-paids" are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and pre-paid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application.

3.) Collateral - In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust.

4.) Earnest Money Deposit - A deposit made by the potential home buyer to show that he or she is serious about buying the house.

5.) Fair Market Value - The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

6.) Lease Option - An alternative financing option that allows home buyers to lease a home with an option to buy. Each month's rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.

7.) Purchase Agreement - A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

8.) Real Property - Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

9.) Right of First Refusal - A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

10.) Equity - A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.