Frequently Asked Real Estate Questions

Conventional sale: When the property is owned outright and has no mortgage.

Conventional sales are often smoother transactions than those that require financing as there is no dependence on the buyer receiving a loan to purchase the property.

A conventional sale is not to be confused with a conventional loan. In this instance:

“Conventional” just means that the loan is not part of a specific government program. Conventional loans typically cost less than FHA loans but can be more difficult to get.

This may sound confusing, so just ask your Realtor to explain it to you if you’re not clear. ☺️

What is a credit score?

A number ranging from 300-850 that’s based on an analysis of your credit history.

Your credit score helps lenders determine the likelihood you’ll repay future debts.

You’ll need a score of 620 or better, but you’ll get better financing rates with a score of 720 or higher.

There is much more to know about credit and credit scores, so feel free to ask if you have specific questions.

To learn more about credit scores and credit reports, click here.

What is a down payment?

The sum in cash that you can afford to pay at the time of purchase of a home or property.

A conventional loan down payment is usually 20% of the sales price, but other types of financing require as little as 3.5% to 15%. Some 0% down programs are also available.

A mortgage lender can tell you what types of loans you qualify for.

The equity in a home or property is the difference between how much your home is worth and how much you owe on your mortgage.

So if your home is worth $500,000 and you owe $450,000 on your mortgage, your equity in the home is $50,000.

See also home equity line of credit.

Escrow as it relates to real estate is a process of holding money and documents in a secure account while two parties complete a purchase.

Escrows are usually held by a Title and Escrow company.

This gives the buyer and seller peace of mind that the transaction is safe and that the buyer will not be able to take the money and run.

The escrow account ensures that the buyer has the necessary funds and that the seller will receive them when the transaction is complete.

See also close of escrow.

What is the FHA?

The FHA (Federal Housing Administration) is an agency of the US government that provides insurance for mortgages.

This insurance helps make it easier for people to get approved for a loan and makes it possible for them to get a loan with a smaller down payment.

The FHA also sets rules and standards for lenders to make sure that loans are fair and safe.

See also FHA Loan.

What is an FHA Loan?

A mortgage insured by the Federal Housing Administration – usually requires a good credit score and a down payment to qualify.

An FHA loan is a loan that is backed by the Federal Housing Administration. It is designed to help people buy a home who may not have the money to make a big down payment.

With an FHA loan, the borrower is able to make a smaller down payment and the government will help insure the loan, making it easier for the borrower to get approved.

What is a fixed-rate mortgage?

This mortgage’s interest rate will never change, even if the term of the loan is 30 years.

Fixed-rate mortgages typically have a term of 15 or 30 years.

Homeowners prefer this type of loan as it has a lower amount of risk compared to variable-rate loans, and the monthly payment remains the same for the life of the loan.

What is a Foreclosure?

When the lender takes ownership of a property due to failed payments by the buyer.

A foreclosure in real estate is when a homeowner stops making payments on their mortgage and the lender takes back the property.

The lender will then try to sell the property to recoup the money that was owed on the mortgage. Foreclosures can often be a lengthy and expensive process for the lender and the homeowner.

See also pre-foreclosure.

What is a Home Equity Loan?

A home equity loan — sometimes called a second mortgage — is a loan that’s secured by your home.

You get the loan for a specific amount of money and it must be repaid over a set period of time.

You typically repay the loan with equal monthly payments over a fixed term.

If you don’t repay the loan as agreed, your lender can foreclose on your home.

See also HELOC

What is a lender?

A lender, AKA Mortgage Lender is an entity that issues mortgage loans. Typically, a bank, mortgage broker, credit union, etc.

A mortgage lender is a bank or other financial institution that provides loans to people who want to buy a home.

The lender will look at a person’s credit history, income, and other factors to decide if they are eligible for a loan and how much they can borrow.

The lender will also discuss the different types of mortgages available and the interest rate and terms of the loan.

What is a Mortgage?

A mortgage is a loan from a lender or bank that is used to purchase your home. BTW, the “t” is silent, so it’s pronounced “more·guhj”.

A mortgage is a loan that a person takes out to buy a house.

The borrower pays the lender back over time with interest.

The mortgage is secured by the house, which means if the borrower can’t make payments, the lender can take the house.

Mortgages usually have a fixed interest rate and a set term (how long the loan will last).

For instance, a common mortgage is a 30-year fixed loan. That is, the loan lasts for 30 years and the interest rate remains the same over the life of the loan.

The interest rate on a mortgage loan you pay to borrow that money when buying a home.

The lower the rate, the better.

Mortgage rates vary daily, so you don’t have any particular rate until the lender “locks in the loan” securing that rate for your home purchase.

The rate you qualify for is based on your personal financial situation and the type of loan you are applying for.

What is a Pre-Approval Letter?

It is a letter from a lender indicating you qualify for a mortgage of a specific amount.

Getting Pre-Approved

You’ll fill out a mortgage application, provide documents, and bank statements, get a copy of your credit report, etc.

Getting pre-approved is what you need to do before starting a home search. The person selling your dream home will want to make sure you really are qualified to buy. Most sellers aren’t willing to accept your offer with only a pre-qualification.

What is a Settlement Statement?

A settlement statement, also known as a HUD-1, is a document that lists all the costs associated with buying or selling a home.

It includes the purchase price, loan fees, taxes, insurance, and any other costs that need to be paid at closing.

This document will be given to the buyer and seller at the closing of the real estate transaction.

Really good agents will also send you a copy of your HUD-1 right before tax time to make sure you take advantage of any tax-deductible expenses from the purchase or sale of your home.

What does it mean when you are Underwater?

The phrases “underwater” and “upside down” refer to a situation when the amount owed on a mortgage loan is greater than the value of the property.

In simpler terms, a house is underwater when the owner owes more on the mortgage than the house is worth.

You have various options on what to do if you are in this situation.

An Active Property

The property is actively for sale and on the market. The sellers may have received offers but have not accepted any yet.

When an offer is accepted the property will become Pending the completed sale.

If the contract falls through, typically the property will go Active again.

Active contingent in real estate is a status of a property listing indicating that it is under contract, but that the sale is contingent on certain conditions being met.

These conditions may include the sale of the buyer’s current home, the receipt of satisfactory inspection reports, or the approval of a loan.

If the conditions are not met, the listing may revert to active status.

A professional analysis used to estimate the current value of the home in the real estate market.

This is a necessary step in validating a home’s worth to you and your lender as you secure financing.

All parties to the transaction hope the appraisal will come in at the same amount as the listing price.

If the appraisal comes in low, your options include backing out of the sale, having your agent appeal the low value, paying the difference in value in cash, and renegotiating the offer.

What does As-is mean?

A contract or offer clause stating that the seller will not repair or correct any problems with the property. Also used in listings and marketing materials.

In other words, selling a house as-is means that a buyer will get the property in its exact, current condition without any additional repairs or upgrades.

What does Back on Market mean?

The property was under contract with another buyer and their contract fell through, so it is Active again.

BOM stands for “back on the market” in real estate and is a common abbreviation used by real estate agents.

Once you have made your offer and the offer is accepted by the seller, the following questions may arise.

What does “under contract” mean?

Under contract means that all parties have agreed on terms, have signed the contract, and the signed contract has been delivered to both buyer and seller. Payment of the escrow deposit is expected but is not a requirement to make a binding contract.

What is escrow?

The escrow money, escrow deposit, or good faith deposit is money that is included with an offer, or as soon as an offer is accepted, to show the seller that you are serious about moving forward with the purchase of the home.

Because you forfeit this deposit if you back out of the purchase for any reason not allowed for in the contract, the larger the escrow deposit, the more seriously your offer is taken.

This is not the same as the down payment.

Do I need an inspection?

We always recommend that you have a home inspection done. In the grand scheme of things, paying a few hundred dollars to have peace of mind that there are no hidden dangers or problems is well worth the money.

The inspections you may need or want will vary depending on the home you are buying and the contract terms. Your agent will thoroughly discuss the inspections with you once your offer is accepted.

How much are inspections?

The cost of the home inspection depends on the size of the house and additional inspections requested, such as swimming pool, septic tank, termite/pets report, insurance, four-point (HVAC, plumbing, roof, and electrical,) wind mitigation, and radon. An average home inspection, without additional inspections, is about $300.

I will give you my recommendations for inspectors, but you can choose your own if you wish.

What if my loan doesn’t get approved?

If you have gone through the pre-approval process and have been forthcoming with all the information requested by your lender, it’s unlikely you will be turned down, but it does happen.

Make sure you do not change jobs, purchase big-ticket items on credit, take out a car or boat loan, or open any other new credit accounts while your mortgage is being processed.

If your loan does fall through, talk with your lender about changing to a different loan type.

When can I start moving?

When you have the keys! When you are financing your purchase, it takes four to six weeks for your loan to be processed. Once the lender gives the all-clear, closing is scheduled. You will sign your loan documents and both parties will sign documents transferring ownership to you.

Unless other arrangements have been agreed upon by both parties, the sellers should have completely vacated the home when they sign the closing papers. You can have your belongings ready to move, and a moving company scheduled before you go to closing.

At closing, you will receive the documentation you need to provide utility companies with proof of your new residence.

But seriously, everything is tentative until you have the keys! Even if the home is vacant, don’t even think of starting to move until escrow has closed and you have the thumbs up from your agent.

Close of escrow is the final step in the real estate transaction. It is when the buyer pays the seller for the property and all the documents are signed.

After close of escrow, the title deed is transferred to the new owner and the keys are given to the buyer.

The escrow company then sends the money to the lender and all the parties involved in the transaction.

Closing: The end of a transaction where documents are signed, and funds are dispersed.

Closing costs are the fees that the buyer and seller will owe associated with the home-buying process, such as the real estate brokerage commission and title insurance.

Most are paid by the buyer, but the seller pays for some.

The fees will vary with each transaction. Your lender or title rep will let you know what the fees are and how much you will need at the close of escrow.

The fees required to complete the real estate transaction include points, taxes, title insurance, financing costs, and items that must be prepaid or paid through escrow.

Comparative market analysis or competitive market analysis, aka CMA, compares the sales price of similar properties in the area to help determine the price of a property.

A CMA estimates a home’s price based on recently sold, similar properties in the immediate area. Real estate agents and brokers create CMA reports to help sellers set listing prices for their homes and help buyers make competitive offers.

If you need more details about CMAs, read “What Is Comparative Market Analysis (CMA) in Real Estate?“.

Not to be confused with Country Music Awards. 🤓

A condominium (Condo) is a type of housing where several people own separate units in a larger building or complex.

Each unit is owned by an individual and the common areas, such as the lobby, pool, and gym, are shared by everyone who lives in the building.

Condominiums are often popular because they are often located in desirable areas and offer amenities that single–family homes don‘t.

What is the difference between a condo and a townhouse?

A condo is a type of housing where several people own separate units in a larger building or complex. Each unit is owned by an individual and the common areas, such as the lobby, pool, and gym, are shared by everyone who lives in the building.

A townhouse is similar to a condo, but it is usually smaller and more like a single–family home. Townhouses may have more amenities like a private backyard or a garage.

What is a Contingency?

A provision of the contract that keeps the agreement from being fully legally binding until a certain condition(s) is met.

For example, the purchase of a home can be contingent upon the buyer selling their home first.

Every real estate contract includes space for “contingency clauses,” or conditions put forth by the homebuyer and home seller that must be met for the transaction to close.

Here are some types of contingency clauses you might see in your next home sale…

📝 Home Inspection / Due Diligence
📝 Cost-of-Repair
📝 Appraisal
📝 Financing or Mortgage
📝 Sale and Settlement

Contingency clauses can be tricky to navigate, which is why it’s always a good idea to have a licensed real estate professional guide you through the process.

We know this lingo inside and out, so reach out if you’re thinking about buying or selling a home soon!

In real estate, a contingent offer is an offer made on a property, which says that certain conditions must be met in order for the sale to be completed.

A real estate contract is a legally binding agreement between two parties for the sale and purchase of a property.

It outlines the price, terms, and conditions of the sale. It also includes any other agreements that the buyer and seller have made, such as repairs that need to be done before the sale is completed.

All real estate contracts must be written and signed by both parties.

What is a credit score?

A number ranging from 300-850 that’s based on an analysis of your credit history.

Your credit score helps lenders determine the likelihood you’ll repay future debts.

You’ll need a score of 620 or better, but you’ll get better financing rates with a score of 720 or higher.

There is much more to know about credit and credit scores, so feel free to ask if you have specific questions.

To learn more about credit scores and credit reports, click here.

Days on market (DOM) means the number of days a home has been listed on the market.

The number of days the property has been on the market may reflect the desirability and/or pricing of the home.

If the home has been on the market too long, the property may be stale.

In real estate, what is a deed?

A deed is a document that shows who owns a piece of property. When someone buys a house, they get a deed that shows they are the owners. The deed has the names of the people who bought the house and is signed and notarized so it is legally valid.

This is not to be confused with a deed of trust. A deed conveys ownership; a deed of trust secures a loan.

What is a down payment?

The sum in cash that you can afford to pay at the time of purchase of a home or property.

A conventional loan down payment is usually 20% of the sales price, but other types of financing require as little as 3.5% to 15%. Some 0% down programs are also available.

A mortgage lender can tell you what types of loans you qualify for.

The representation of opposing principals (buyers & sellers) at the same time.

That is, one real estate agent represents both the buyer and the seller in one transaction (sale of a home).

What is Due Diligence?

How to prevent #buyersremorse 👇

When buying a home, it’s extremely important to do your “due diligence.” During this period, you’ll look into the condition of your chosen property and compare it to other homes like it to make sure it’s really a good fit and value.

When a homebuyer investigates facts about the physical and financial condition of the property and its area before they make an offer and after their contract is accepted.

Due diligence is reasonable steps taken by a person in order to satisfy a legal requirement, especially in buying or selling real estate.

As your agent, we’ll guide you through this process by pointing out and addressing any of the home’s red flags so you feel completely confident about your purchase.

What is an easement? 🔎🏡

A right to cross or otherwise use someone else’s land for a specified purpose.

The term often crops up after buyers have made an offer on a home that’s been accepted, at which point a title search brings up the easement—which is essentially the legal right for someone else to use the property, or part of the property for a specific purpose.

Say what? You bend over backward to buy a home and now you have to share?! Don’t worry, in most cases, it’s not as bad as it sounds.

Types of Easements:

📝 Right of way: This is where a neighbor may need to pass through the property via a driveway to access the main road, a neighborhood playground, or a community feature (like a lake).

📝 Utility maintenance: This easement is typically granted to utility companies to run power and cable lines on a property.

📝 HOAs/condos: If you live in a condo or home managed by a homeowners association, odds are these institutions own much of the property—while residents have rights to pass through.

What is an escalation clause?

An escalation clause is a clause in a real estate contract that allows the purchase price of a property to increase if a certain condition is met.

For example, if the buyer and seller agree to an escalation clause and the market value of the property increases, the buyer will have to pay more for the property than originally agreed upon.

This clause is typically used when two buyers are competing to purchase the same property.

What is an expired listing?

A real estate listing that has expired and is no longer active, usually because it didn’t sell in the amount of time agreed upon by the listing agent and the owner of the home.

Other reasons for a listing to expire are the asking price was not met, or there were other issues with the property.

If you see an Expired listing, the owner may still be interested in selling. Ask your agent about it.

What is a final walkthrough?

The last inspection of the property before signing the closing documents.

A final walkthrough in real estate is when a buyer goes through the property one last time before the closing.

The buyer makes sure that all the items in the contract are in the same condition they were in when the buyer agreed to purchase the property.

This includes checking for any damage, making sure all appliances are working, and ensuring that all repairs agreed upon by the seller have been done.

What is a FSBO?

FSBO stands for “For Sale by Owner”. Often pronounced “fizbo”.

The owner of the home has it listed without an agent representation.

The buyer’s agent can usually still show the home, as many FSBOs will agree to work with agents representing a buyer.

Be wary of FSBOs since rarely does the homeowner have the requisite knowledge, experience, and understanding needed to sell a property.

A home inspector examines your home for integrity – such as the HVAC system, electrical, plumbing, attic, flooring, foundation, etc.

What is a Homeowners Association (HOA)?

A private organization that is often formed by a real estate developer to manage homes and lots in a residential subdivision.

A Homeowners Association (HOA) is an organization made up of homeowners who live in a specific neighborhood or development.

The HOA is responsible for managing and maintaining the common areas of the neighborhood, such as parks and playgrounds.

They may also have rules in place that all homeowners must follow, such as restrictions on landscaping or noise levels.

What are real estate inspections?

Real estate inspections are when a professional inspector looks at a property to make sure it is in good condition.

They will look for any potential problems that could affect the safety or value of the property.

They will also check things like the roof, plumbing, and electrical systems to make sure they are in good working order.

An inspection can help protect buyers from buying a property with hidden problems.

There are a number of inspection types including home inspection, pest inspection, roof inspection, and more.

Your Realtor will help you decide which inspections are appropriate for your situation.

What is a Listing?

In real estate, the word “listing” is typically used to refer to the for-sale home or property itself, although it technically means the agreement between the broker and the owner of the home to market and sell the property.

This is not the same as listing the property on the MLS (Multiple Listing Service).

What is the MLS?

MLS stands for Multiple Listing Service. They collect, compile and distribute all information about homes listed for sale.

The MLS is the organization real estate brokers use to search for and list properties for their clients.

Membership isn’t open to the general public, although selected MLS data may be sold to real estate listing websites, like Realtor.com or our own MLS listing search where the public can search the MLS at no charge.

See also the term “listing“.

The interest rate on a mortgage loan you pay to borrow that money when buying a home.

The lower the rate, the better.

Mortgage rates vary daily, so you don’t have any particular rate until the lender “locks in the loan” securing that rate for your home purchase.

The rate you qualify for is based on your personal financial situation and the type of loan you are applying for.

What does Pending mean?

With a property that is pending, the property owner has accepted an offer from a buyer and they are under contract with that buyer.

Their agreement may be subject to a variety of contingencies: inspections, appraisal, financing, and more.

The home is not sold just yet. Typically if the sale does not go through, the house will return to “Active” status.

What is a Pre-Approval Letter?

It is a letter from a lender indicating you qualify for a mortgage of a specific amount.

Getting Pre-Approved

You’ll fill out a mortgage application, provide documents, and bank statements, get a copy of your credit report, etc.

Getting pre-approved is what you need to do before starting a home search. The person selling your dream home will want to make sure you really are qualified to buy. Most sellers aren’t willing to accept your offer with only a pre-qualification.

What are Property Taxes?

A levy or tax imposed by a municipality on real estate and personal property. The amount of tax varies depending on the property value.

Property taxes are an annual tax that local municipalities collect each year, based on the assessed value of your property (not on the appraised value of your home). These funds help pay for services that benefit the community, such as schools, roads, maintenance, etc.

First-time homeowners often forget to factor property taxes into the overall cost of their new home, which can come as a nasty shock come tax season. So let this be a reminder to all homeowners to calculate property taxes into their annual budget!

 BONUS TIP: If you own a rental property, your property taxes may be tax-deductible 

What is a Purchase and Sale Agreement?

Often just a “purchase agreement”, it is the written contract between the buyer and seller that outlines the terms of the sale.

 The completion and signing of a purchase agreement effectively places both the buyer and seller (as well as the property in question) “under contract.”

Does a real estate purchase agreement need to be notarized?

No, a real estate purchase agreement does not require notarization to be valid as it is not filed with county records.

What is a Real Estate Agent?

A licensed professional that represents a buyer or seller.

A real estate agent is a professional who helps people buy or sell property.

They will help you find a home that meets your needs, negotiate a purchase price, and handle all the paperwork that comes with buying or selling a house.

A real estate agent can also answer questions about the local housing market and provide advice on things like taxes and financing.

The agent may or may not be a Realtor®.

What is a real estate broker?

A real estate broker is a licensed professional that represents a buyer or seller – they can own and operate a brokerage with subordinate agents.

A real estate broker is a licensed professional who helps people buy or sell property.

They are more experienced than real estate agents and typically have additional training, including a broker’s license.

Brokers can help you find a home that meets your needs, negotiate a purchase price, and handle all the paperwork that comes with buying or selling a house.

They can also answer questions about the local housing market and provide advice on things like taxes and financing.

Real Estate agents work under the Broker of record for a real estate office.

An individual who provides services in buying and selling homes.

Real estate professionals are there to help you through the confusing paperwork, find your dream home, negotiate any of the details that come up, and so you know exactly what’s going on in the housing market.

There are several types of real estate professionals including Realtors^®, real estate agents, and real estate consultants.

What is a REALTOR®?

A designation that the agent is a member of the National Association of REALTORS®.

A Realtor is a real estate professional who is a member of the National Association of Realtors (NAR).

Realtors must have a license and have met certain standards for education and experience.

They help people buy or sell property, including finding a home that meets their needs, negotiating a purchase price, and handling all the paperwork that comes with buying or selling a house.

They can also answer questions about the local housing market and provide advice on things like taxes and financing.

Realtors® are held to a higher standard than non-realtors and agree to the Code of Ethics and Standards of Practice of the National Association of REALTORS®.

What are seller concessions?

They are incentives to motivate buyers to purchase a home.

Seller concessions, also known as seller contributions or seller-paid closing costs, refer to financial incentives that a home seller may offer to a homebuyer to help them cover some of the expenses associated with buying a home.

These concessions are typically negotiated as part of the sales contract and can take a variety of forms, such as paying for some or all of the buyer’s closing costs, providing a credit toward the buyer’s down payment, or offering to pay for repairs or improvements to the property.

What is a Seller Disclosure?

A Seller Disclosure or Disclosures provide Information about the property about significant renovations, water damage, pest damage, etc.

The required disclosures vary by state, so be sure to talk about this with your agent.

What is a Settlement Statement?

A settlement statement, also known as a HUD-1, is a document that lists all the costs associated with buying or selling a home.

It includes the purchase price, loan fees, taxes, insurance, and any other costs that need to be paid at closing.

This document will be given to the buyer and seller at the closing of the real estate transaction.

Really good agents will also send you a copy of your HUD-1 right before tax time to make sure you take advantage of any tax-deductible expenses from the purchase or sale of your home.

The property is Sold

The property has been sold and is off the market. The transaction has been completed and the new buyers own the home.

The property is no longer available to purchase or take offers on.

Time to look for another home to buy. 

What does Temporarily off the market (TOM) mean?

The owner has decided to take the listing off the market for an undetermined amount of time. Typically, this is because work is being done, or the home is unavailable for showings at the time.

Usually, the home will be back on the market in the near future. If not, the listing status will go to Cancelled.

What is the Title of a house or property?

Title (aka Title Deed) refers to the legal document that shows the history of ownership and transfers of property – proving you are the current and rightful owner of the property.

A title, also known as a title deed, is a document that shows who owns a piece of property.

When someone buys a house, they get a title deed that shows they are the owners.

The title deed has the names of the people who bought the house and is signed and notarized so it is legally valid.

What is Title Insurance? 🤔

Most lenders require title insurance, which protects them from claims such as liens, easements, and flawed records that can come up even years after a transaction.

💡 TIP: Buyers can also purchase their own “owner’s title insurance,” a one-time fee that protects them from any financial burdens, such as back taxes.

Although you may cringe at another cost, this is an important one that protects your ownership rights!

Our best advice? Contact our team for a ✨ free consultation ✨ to ensure you don’t miss any critical legal requirements if you’re buying or selling!

A townhouse is a type of housing where several people own separate units in a larger building or complex. Each unit is owned by an individual and the common areas, such as the lobby, pool, and gym, are shared by everyone who lives in the building.

Townhouses are often popular because they are usually smaller than single–family homes and offer amenities like a pool or gym that single–family homes don‘t.

What is the difference between a condo and a townhouse?

A condo is a type of housing where several people own separate units in a larger building or complex. Each unit is owned by an individual and the common areas, such as the lobby, pool, and gym, are shared by everyone who lives in the building.

A townhouse is similar to a condo, but it is usually smaller and more like a single–family home. Townhouses may have more amenities like a private backyard or a garage.