Real Estate Jargon Explained
Published on January 9, 2025 | 3 Minute read
Melanie
Ortiz Reyes
Content Specialist
Whether you're dipping your toes into the real estate market for the first time or returning after years away, the terminology can feel like a foreign language. Let's break down common real estate terms you'll encounter during your buying or selling journey.
Property Types and Ownership
Ever wondered about the difference between a condo and a co-op? Or what exactly makes a property "single-family"? These are fundamental terms that shape your ownership rights and responsibilities.
A single-family home stands alone on its lot, giving you full control over both the building and land. Condominiums offer a different approach. In this case, you own your unit's interior while sharing ownership of common areas with other residents. Co-ops take yet another path, where you technically own shares in a corporation rather than direct property ownership.
For more on different property types, read here.
The Financial Side
The money talk doesn't have to be intimidating. Your pre-approval letter shows how much house you can afford based on your financial situation. The earnest money deposit proves you're serious about buying and it typically ranges from 1-3% of the purchase price.
Your mortgage's loan-to-value ratio (LTV) compares your loan amount to the property's value. A lower LTV often means better interest rates. Points are upfront fees you can pay to reduce your interest rate. Each point equals 1% of your loan amount.
The Nitty-Gritty of Property Value
Sellers often ask about the difference between market value and appraised value. Market value reflects what buyers are willing to pay right now, while appraised value represents a professional appraiser's opinion based on recent comparable sales ("comps") and property condition.
The absorption rate measures how quickly homes are selling in your area. A low rate means properties are sitting longer, potentially giving buyers more negotiating power. A high rate suggests a competitive market where quick decisions matter.
Understanding the Process
The closing process brings several terms into play. Title insurance protects against ownership disputes. Escrow holds funds and documents until all conditions are met. The settlement statement breaks down every financial aspect of your transaction.
A home's deed transfer officially changes ownership, while recording makes this change public record. Understanding contingencies is important since these conditions must be met for the sale to proceed, covering aspects like inspection results or mortgage approval.
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Red Flags and Deal-Breakers
Some terms signal potential issues. An encumbrance represents a claim against the property, like a lien or easement. Zoning restrictions limit how you can use the property. A certificate of occupancy confirms the building meets safety codes and is legal to inhabit.
Modern Market Terms
Today's real estate landscape includes newer concepts. An iBuyer makes instant offers on homes using algorithms. Virtual tours and 3D walkthroughs let you explore properties remotely. Hybrid closings combine online and in-person elements for convenience.
Moving Forward with Confidence
Understanding these terms empowers you to navigate real estate transactions with confidence! Don't hesitate to ask a PrimeStreet agent to clarify any jargon they're there to help you make informed decisions about what's likely your largest financial investment.
Remember, real estate terminology evolves with the market. Stay curious, ask questions, and keep learning as you move through your real estate journey. Your knowledge will help you spot opportunities and avoid potential pitfalls along the way.