Easy Real Estate Terms

Welcome back! We are choosing not to acknowledge the next round of winter weather that is predicted to hit tomorrow, and instead we are thinking ahead to what it shaping up to be a fantastic spring and summer real estate market. As we look forward to spring with its sunshine, warmth, and liveliness, we also look forward to many afternoons and evenings spent with clients touring houses and preparing their homes to sell. Spring is the perfect time to put your house on the market because everyone tends to come out of hibernation and gets excited to see what new inventory is on the market and also what new construction will be available from the Tri-State’s many talented builders.

This spring is a particularly great time to sell because inventory is still a bit low in the Evansville area and there are many buyers who are ready to purchase but can’t find what they want. The economy is looking good and the demand for homes is up; this is great for sellers because that means sales prices are up! So, if you are considering a move this year to downsize, upgrade, or buy your first home, now is the time!

If you take the plunge and decide to buy or sell, there are a few terms we think will be important for you to know. You will feel more comfortable if you know some of the lingo; plus, you will be quite impressive when you casually toss out terms like escrow and comparative market analysis when we meet with you.

Below are 10 helpful terms for you to know for your upcoming transaction:

1) Appraisal
An appraisal is an assessment done by a certified appraiser justifying the purchase price for a property. The appraisal is usually based on an analysis of comparable sales of similar homes nearby.

2) Commission

Commission refers to the money that is paid to real estate agents after the closing of the transaction. The commission is a percentage of the purchase price, and in Indiana this commission is paid by the seller. This is how real estate agents earn their money.

3) CMA (Comparative Market Analysis)

A CMA is a professional report that real estate agents give to their clients. The report is an analysis done on the values of similar homes in the neighborhood or area that have sold or that are for sale at the same time. This report helps give a realistic listing and selling price. An agent can recommend a list or purchase price to a client, but ultimately the client decides what number they feel comfortable with.

4) Earnest Money

Earnest money is a deposit made by the potential home buyer to show that he or she is serious about buying the home. They money is deposited into an escrow account, and when the transaction is finalized, the funds are put toward the buyer’s down payment. Depending on the home price, earnest money amounts typically range from $500-$2000.

5) Escrow

To place something in escrow means to place it in the hands of a third party until certain conditions are met. For example, earnest money deposits are put into escrow until they are delivered when the transaction is closed. Escrow is opened when the buyer and seller sign the purchase agreement.

6) Equity

Equity refers to a homeowner’s financial interest in a property. Equity is the difference between the market value of the home or property and the amount still owned on its mortgage and other liens. Basically, the more equity you have in your home, the more you "own" your home in a sense because you get closer and closer to paying off the mortgage.

7) Lien

A lien is a legal claim against a property that must be paid off if the property is sold. A mortgage is the most common type of lien since the lender has ownership of the property until the mortgage is paid off. When the lien is satisfied, the lender discharges it.

8) Real Estate Purchase Contract (Purchase Agreement)

The Real Estate Purchase Contract (often referred to as a Purchase Agreement) is a contract between parties for the purchase and sale of real estate. They are legally binding, in writing, and signed by both parties. We will go over this contract in detail with you at our initial meeting so you feel comfortable with it when we are ready to make an offer on a home or an offer is made on the home you're selling.

9) Short Sale vs. Bank Owned Home

When a homeowner defaults on his mortgage, the lender may allow the home to be sold in a short sale. This means that the bank has agreed to let the home be sold for less than what the current owner owes on the property. A bank-owned home is simply a home that has been foreclosed, but the lender has not agreed to sell the home for less than what is owed on it.

10) Under Contract

If a property is “under contract” it means that the seller has accepted a buyer’s offer to purchase the property. Generally, the buyer is given a time period in which the sale can be finalized. During this time period, the seller agrees to take the home off the market and the transaction is considered "pending".

Now, there won’t be a quiz for anything, but we hope these simple definitions will help you feel a little more informed and confident as you consider a venture in real estate. In the meantime, we will be thinking warm thoughts and looking forward to working with some great clients in the next few months!