Real Estate 101: Understanding the Lingo
As a local real estate agent, I am often asked to explain some of the more complicated
terms that come up during the buying and selling process. In this article, I will break
down seven terms that I believe are particularly important for buyers and sellers to
understand: Pending or contingent offer, Closing Costs, Equity, Certified Funds, Due
Diligence, Contingencies, and Title Commitment.
First, lets talk about Pending Offers. Locally, we consider an accepted offer to purchase
a property, as a Pending Offer.” This means that the property is generally no longer
available for other buyers to make offers on, but the sale is not yet final.
A Contingent Offer is similar to a Pending Offer, but it comes with certain conditions that must be met
before the sale can be completed. For example, a buyer may make a Contingent Offer
that is only valid if they are able to sell their current home first. If the contingency is not
met, the offer can be withdrawn by either party.
Closing Costs are another important term to understand. These are the costs
associated with buying or selling a property that are typically paid at the actual time you
meet to finalize the sale. These costs can include things like appraisal fees, title
insurance, and legal fees. They can be substantial, so it's important for buyers and
sellers to be aware of them up front and budget accordingly. In my opinion, an
experienced agent will be able to help you identify your specific closing costs before you
agree to a contract.
Equity is simply the difference between the value of a property and the amount of
money still owed on it. For example, if your property is worth $300,000 and there is a
$200,000 mortgage outstanding, the equity you have in the property would be
Certified Funds are funds that have been verified as genuine and available for use. For
example, a cashier's check or wire transfer would be considered certified funds, while a
personal check would not. When buying or selling a property, it's a requirement that you
bring certified funds to your closing.
Due Diligence is the process of investigating a property before purchasing it. This can
include things like inspecting the property and researching the neighborhood. It's
important for buyers to do their due diligence to ensure that they are making an
informed decision about purchasing a property. When executed properly, this protects
you from being stuck buying a house that has undesirable conditions uncovered.
Contingencies are contract conditions that must be met before a sale can be completed.
For example, a buyer may have a contingency that the property must pass a mold
inspection before they will agree to buy it. Contingencies can be included in both
Pending and Contingent Offers and can be anything that all parties agree to in writing.
Finally, a Title Commitment is a document that outlines the terms of the title insurance
policy for a property. It includes information about the property, such as its legal
description, as well as any restrictions or liens that may be on the property. It is
important for buyers and sellers to review the title commitment to ensure that there are
no surprises when it comes to the property's title.
In conclusion, understanding the complicated terms that come up during the buying and
selling process is essential for both buyers and sellers. By understanding terms like
Pending or Contingent Offer, Closing Costs, Equity, Certified Funds, Due Diligence,
Contingencies, and Title Commitment, buyers and sellers can make informed decisions
and navigate the process with confidence. If you have any questions about these terms
or any other aspect of buying or selling a property, please don't hesitate to reach out to
your trusted real estate agent for guidance.