Real Estate Jargon…What Do All of These Terms Mean?
We Realtors often bandy about tons of real estate jargon. We talk to our clients and friends about short sales, REO’s, contingency periods, etc. I have come to realize, however, that just because we know what all of this stuff means, not everyone does, so I thought it would be helpful to describe some of the terms we use. Hopefully, this will give you some idea of what we’re talking about as we rattle on and on and your eyes are going bleary! Here goes:
Contingency Periods: We, generally, refer to these when doing our contracts. As an example, we tell you that you will have a 10 day period to “remove your property condition contingency” or 20 days to remove loan and appraisal contingencies. What this really boils down to, is that these are the time frames during which you will have the right to get your deposit back if you cancel the contract. Once you “remove these contingencies,” you are no longer entitled to get your deposit back, unless you can prove some sort of fraud.
Appraisal: When you apply for a loan on a particular property, the bank sends someone out to verify that the house is actually worth what you are paying for it. This protects you from purchasing and the lender from loaning on a property that isn’t really worth what you are offering to pay.
If the appraisal determines that it is not worth what you are paying, then there are several options. You can walk away from the deal or you can try to get the seller to lower the price to the appraised price. Or, if the seller won’t negotiate, and you really want the house, you can put a little more of your cash into the deal to make it happen.
REO’s: Basically, these are homes that the banks have taken back from the owners/foreclosed properties. These can be a very good opportunity, because the banks are very motivated to get them sold. The only down sides are that you get very limited disclosures and, oft times, the homes have been left in pretty bad condition.
Short Sales: Better known as a big “pain in the neck,” short sales can also be a good deal. A short sale occurs when the owner of the home owes more on it than it is worth. He/She puts the house on the market and tries to sell it. When an offer comes in, the Seller agrees to it and then the bank has to approve the sale. The only real downside to short sales is that it can take a very long time (sometimes months and months) to get a response from the bank and, sometimes, they come back and say no. While you are waiting, the market can change, interest rates can change, or the house can go into foreclosure. Short sales are quite a gamble, but can sometimes be worth it in the end.
MLS: This stands for Multiple Listing Service and is the place where just about all listings are able to be viewed by real estate agents. At this site, we are able to get a lot of information that the consumer doesn’t get to see, such as showing instructions, whether the house is vacant or occupied, if there is a dog on the property, etc. As a consumer, you can get quite a bit of information by going to Realtor.com, which is a terrific website and gives you almost all of the information that we Realtors get to see, as well as photos of the property, etc.
Prorations: This basically boils down to the fact that when you purchase a home the seller is responsible for paying all costs associated with the property up until the time you “close escrow.” You are responsible for everything from that day forward.
Escrow: Escrow is the period of time between when you write a contract to purchase a home and when you actually own it. Typically, this period is 30 – 45 days. During this time, you do your home inspections, get your financing in order and have your appraisal. When you “close escrow,” you officially own the home.
Closing Costs: Over and above the price you are paying for the home, you will have closing costs associated with your purchase. These will include everything from loan fees, to property insurance and title insurance. These fees vary widely depending upon the type of loan you are getting and should be thoroughly discussed with your lender.
Title & Escrow Companies: One of the most expensive items included in your closing costs will be your title and escrow insurance. Title & escrow companies are responsible for three critical things.
1) They make sure that the person selling the property actually owns it and has the right to sell it. This is very, very important because, although not common in California, there are crooks out there who attempt to sell homes/property that they do not actually own. The title company does something called a “title search” to ascertain exactly who actually owns the property.
2) One of the title company’s important tasks is to ensure that any and all liens against the property are paid in full before the escrow closes. This is to protect you from owing money to someone who sued the previous owner and is now trying to collect the debt by putting a lien on the property. They insure that you will be protected from these future liens.
3) The title company is, also, in charge of taking care of all of the money in the transaction, making sure that, when you give your real estate agent your deposit on a home, that the money actually goes toward that home purchase and not into someone’s pocket. That is why your check is always made out to the title company instead of the real estate company.
That’s probably more than enough info for today. I hope that these explanations have been helpful. There are many more items to be covered, but these are a few of the terms you hear frequently. Most importantly, when using myself or any other Realtor, you should never be afraid to ask questions. It is our job to make sure that you know what you are signing.
If you have any questions about these terms or any others, please don’t hesitate to email me at kwall@prucal.com. I’ll do my best to answer any questions you have.
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11 Responses to “Real Estate Jargon…What Do All of These Terms Mean?”
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great article, especially when we use different term in australia for the same things
Kathy,
Wow, the definitions are great.
It is easy to start speaking in our own tounge when we speak to cutomers, and we have to remember that we need to ask if they understand.
Thanks a million!
Brian
Kathy,Taking a few moments to read all that information will help the buyers and sellers understand how detailed a real estate transaction can be. It also should remind us as a Realtor we have a special need to explain these subjects in detail to our customers. When we just rush through
an explaination we can leave the impression that we are too busy, or are not listening. It is always a good idea, after an explaination to simply say,any questions?
Great post, thank you
Hi Kathy,
It is sooo true. How many times do we miss the boat because we assume that the customer understands what we are saying. Great job of reminding us all to be clear in our using and explaining real estate “jargon”.
Jonathan
Kathy,
It is amazing how caught up we can get with real estate jargon and not even stopping to think if our clients are following or understanding what we are talking about. Your post spells it all out — great job.
Larry
Thanks to all of you for your comments. And, Jon from Australia, thanks for reminding me of how different everything is from country to country!
Kathy,
GREAT!!! So often we speak above the client’s head. I try to goover the terms and process early on but it does not sink in until the process is happening. Good reminder for us to slow down. It is not necessary for us to impress the client it is important for them to understand. I tease some of my clients by telling them I am just trying to make my next transactoin with them a simpe one.
That was a good piece of news to know about!
we like it in lay mans terms like you
just put it..
Hi Kathy,
Great job with how you explained all the real estate terms. I often find myself using the real estate jargon with my friends and they just look at me funny, then I remember the need to explain in more detail what it is I’m talking about. Thanks again,
what does CH&A mean?
Hi Allan,
Thanks for asking about CH&A. It stands for “central heat & air conditioning.” Judging by the heat today, it seems like the air conditioning would come in handy right now! Please feel free to check back with me diretly if you have any other questions. My email address is kwall@prucal.com.