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COMMON REAL ESTATE TERMS

A/1 CONTINGENCY - An MLS status for a property that is under contract subject to attorney review and/or inspection. APPRAISAL - An expert judgment or estimate of the value of real estate, made by an appraiser, generally for the purpose of establishing fair value and obtaining a real estate loan. CLOSING - Closing (or settlement) is the legal process of transferring ownership of a home from one person to another. CLOSING COSTS - All fees and charges paid at closing for services, including the lender or mortgage broker, and other fees paid to third parties for services that the lender, state, county, or municipality require the borrower to pay. CONTINGENCIES - Conditions or clauses included in a contract that must be met for the transaction to proceed. They protect both the buyer and the seller by outlining specific requirements that, if not satisfied, can allow one or both parties to back out of the deal without penalty. CONTINGENT OFFER - An offer to purchase that is dependent on another event, such as the home buyer needing to sell their current home. CMA (COMPARATIVE MARKET ANALYSIS) - A report that shows prices of recently listed or sold homes similar to your target property. The sold prices, known as “comps”, can help homebuyers evaluate their offer strategy. CONTRACT (SALES CONTRACT) - The written agreement between two parties for the purchase of a property. DEED - A legal document that transfers ownership of property from one party to another. DOWN PAYMENT - An upfront portion of the total purchase price paid when buying a property, usually expressed as a percentage, with the rest financed through a mortgage. EARNEST MONEY - A showing of commitment from the buyer to the seller. The buyer will entrust a dollar amount, usually 3% of the asking price, to a neutral party. If the seller accepts the offer and the buyer backs out for a reason not protected by a contingency contained in the accepted contract, the seller may be entitled to keep all or a portion of the earnest money. ESCROW - Property or money held by a third party until the agreed upon obligations of a contract are met. ESCROW ACCOUNT - Monies collected from the borrower’s installment payments for the purpose of paying property taxes and insurance. An escrow account is typically required when the loan is more than 80% of the property value.

HOME INSPECTION - A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation, and pest infestation. HOMEOWNER’S INSURANCE - A policy that protects you and the lender from fire or flood, which damages the structure of the house; a liability, such as an injury to a visitor to your home; or damage to your personal property, such as your furniture, clothes, or appliances. LIEN - A legal document used to create a security interest in another’s property. A lien is often given as a security for the payment of a debt. A lien can also be placed against a consumer for failure to pay what is owed. MARKET VALUE - The worth of something determined by a willing buyer and seller in an open market. Market value can fluctuate depending on supply and demand and other market forces. PITI - Refers to the combined monthly amount of Principal, Interest, Taxes, and Insurance paid in the financing of real estate. PRE-QUALIFICATION - A mortgage lender has reviewed your financial records and believes you will qualify for a loan. PRE-APPROVAL - A conditional commitment from a lender that they will lend you the money for a mortgage after a loan application has been submitted and reviewed. PRIVATE MORTGAGE INSURANCE (PMI) - Loans with smaller down payments involve greater risk for the lender, who requires protection in case the loan goes into foreclosure. Anything less than 20% down payment usually requires PMI. PROPERTY TAXES - The annual real estate taxes charged to property owners based on the assessed value of the property. SURVEY - A precise measurement of a property by a licensed surveyor, showing legal boundaries of a property and the dimensions and location of improvements. TITLE - The right to, and the ownership of, property. A title or deed is sometimes used as proof of ownership of land. TITLE INSURANCE - Protects the lender or owner against loss in the event of a property dispute. Lenders often require title insurance. WALK-THROUGH - A common clause in a sales contract that allows the buyer to examine the property being purchased at a specified time immediately before the closing, for example, within the 24 hours before closing.

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