Do you remember the first day on a new job and it sounded as if your colleagues were speaking a different language? Most industries have their own jargon, and real estate is no exception. In fact, this industry seems to be the King of Jargon. What’s worse is that people in the real estate profession assume that everyone else knows what all of these real estate terms mean.
Today I’m going to help you master this language by defining some of the most common real estate terms you’ll hear throughout the process of buying or selling a home.
11 Important San Diego Real Estate Terms To Know:
Contract – Fully Executed Contract:
When you are buying a home, a contract is made up of the real estate terms and forms that will create an offer to purchase a property. The contract outlines the terms for buying, the price being offered, the names of the buyer and seller, how the home will be financed, as well as all of the duties and responsibilities for each party involved in the purchase. The contract offers definitions of real estate terms that apply to the agreement.
A listing contract includes the forms that outline the terms for selling the home. It includes things like, the seller’s names, the address, the length of time for the listing, the commission that will be paid, the listing price, the duties of the seller and the real estate agency representing the seller, permission to market the home on the internet and more.
A fully executed contract is when the contract is signed by all of parties involved in the purchase or the sale, accepting the terms of the agreement.
Counteroffer to the Offer:
A counteroffer is a response by the buyer or the seller to the terms of the contract. If a buyer offers $550K for a home and the seller wants $559K for the home, the seller will have their agent submit a counteroffer with their proposed price. A counteroffer can be for pricing, to propose a different closing date, or to add the service companies that will be assigned to help with title insurance, the escrow, home warranty, termite repairs … It can also include any additional information that was left out of the offer that needs to be added to the agreement.
There can be several counteroffers between the seller and buyer before the official acceptance of the contract is completed and all of the forms signed.
Escrow is actually a neutral third party company that has no ties to the real estate home being sold. Their job is to hold the important documents, like the contract or purchase agreement, the Trust Deed to the property, the Ernest Money Deposit, the down payment and the money for closing costs in one place.
They coordinate the loan paperwork being signed, the seller’s and buyer’s costs and disburse money to each person in the transaction once the home has been funded and title recorded in the new buyer’s name.
Opening escrow is when an agent starts the real estate transaction with the contract and Closing escrow is when the home has been funded and title transferred and all parties have been paid and the file is closed.
Earnest Money Deposit:
This is another important real estate term. When a buyer submits an offer to purchase a home, they are expected to be serious about their offer and show good faith. This is usually shown by submitting money into escrow as part of their commitment to following through with the purchase. The money they deposit is called an earnest money deposit or a good faith deposit.
This is often confused with the down payment. This deposit also satisfies one of the six elements required for a contract to be enforceable and is known in the legal world as “consideration.”
The amount of the deposit varies, but you should plan on paying at least 1 percent of the purchase price of the home as your Ernest Money deposit. The deposit is held in an escrow account, until the close of escrow when it will be applied toward the purchase price, along with any down payment you may be bringing as part of your financing terms.
In a real estate contract, anything that puts a condition on the buyer’s willingness or the seller’s ability to release the home for the purchase is a contingency. For example, a buyer agrees to purchase the home if the appraisal comes in at a certain price, if it doesn’t come in at that price, the buyer can back out of the contract or get the seller to reach a new price they agree to. The appraisal becomes a contingency item.
There are also loan contingencies and inspection contingencies. And if a seller needs to sell the home in order to purchase a new home, the seller has a contingency too. Contingency is an important real estate term because it gives you a deadline that you need to complete to remove that contingency in the specified time period in order to be within the deadlines outlined in the contract.
There are always contingencies in every sale, some sales have more contingencies than others. You must complete or waive all the contingencies in writing to move forward to complete the purchase of the home.
Disclosures and Inspections:
The real estate term disclosures sounds daunting, but part of the contract includes a period of time that the buyer has to complete their inspections, investigations and to read all of the seller’s disclosures about the home. A required form from the seller is called the TDS, or Transfer Disclosure Statement. The seller completes forms answering all questions about what they know about the home, to offer the buyer information regarding their safety and the state of the home. Seller’s report what they have repaired, what is not working and any additional information about noise, neighbors and nuisances. The seller needs to provide any reports they have on the home too, such as a termite report, remodeling certificates, as well as receipts for repairs. There are many other disclosures that are part of the San Diego home sale or purchases, such as Seller Property Questionnaire (SPQ) , and the accompanying Addendum, (SPQA). The property may be managed by a Trustee, so there is a Trust Advisory, which is a disclosures. Another required disclosure that agents have buyers sign is called, Disclosure Regarding Real Estate Relationships. Additional disclosures include Agents Visual Inspection along with more disclosures. Real estate terms can be very confusing since there are so many terms to learn.
The buyer’s duty is to do all of their inspections during this period of time. The buyer can hire a roofer, an inspector, a landscaper, a pool person, and any other professionals they want to inspect the property until the buyer is satisfied that they know about the current condition of the home. It is all done during the inspection period.
Due diligence is a legal term and it is a very serious one. It means that the buyer has the duty to undertake a thorough assessment of the property during a specific period of time, usually 17 days. They do it through their inspections, disclosures and investigations. Once they have completed these, they will sign off on the Inspection Contingency.
One buyer after closing on their home, learned that the home didn’t have air conditioning. He assumed there was air when he bought it. He attempted to get the seller and the real estate broker to buy him a unit, but when the judge read the Seller’s Transfer Disclosure Statement. It said, “There is no air conditioning unit in the home.”
The buyer failed in his due diligence (by signing the disclosure statement without reading it or he didn’t pay attention during the home inspection). And the Judge denied his motion for the new air conditioner.
There are 6 required risks to disclose during the sale of a home. These risks are reported by Natural Hazard researchers and provided to buyers from sellers during escrow in the form of a report.
The specific hazards include, special flood zones, damn inundation, high fire zones, wildland fire zones, earthquake fault zones and seismic hazard zones.
There are other hazards that may also be reported such as Radon Gas exposure, Airport Influence areas, Megan’s Law disclosures, and Military ordnance. Take a look at all of the real estate terms we just talked about!! They are all a mouthful.
Escrow Impound Account:
An impound account or an escrow impound account is set up by the lender to collect in advance, your monthly home insurance payment and your property taxes owed on your home. It has nothing to do with the Escrow Company.
Not all lenders require an impound account. It is a wise decision to have one however, because you are paying into this account monthly so when your bi-annual property taxes are due, you have the money saved up, and can pay it.
Many homeowners who don’t have an account may have to scramble at the last minute to pay the property taxes or they are penalized with fines if they didn’t pay on time.
This is a document that is attached to and made a part of the contract. It is created to provide clarity on certain issues that have come up during the escrow period. It may also be added after the contract has been signed to modify anything previously agreed upon by the buyer and seller.
Suppose you make an offer on a home and the seller accepts it –and signs it. You have a contract. What if the inspections get delayed because of a major repair problem, and it takes longer to get repairs made than the time frame agreed upon in the original contract? The closing date needs to be extended to cover this time frame. Your agent will submit an amendment to the contract with the new closing date.
There are many reasons for an amendment, it can be due to new information such as a change in the type of loan you are getting, or even changing lenders, it can be offering credit to the buyer for closing costs… The amendment supersedes the previous terms related to that original real estate contract.
It is signed by the buyer and seller and it becomes a promise to commit to these new changes instead of the previous changes in the original agreement and perhaps some of the real estate terms.
Title insurance protects the new homeowner and the lender against any future claims to the property, liens and encumbrances.
The title company researches the property to make sure that there are no fraudulent conveyances, unpaid taxes, unreleased liens against the property or problems with the legal description being conveyed. Title insurance covers the insured party for any claims and legal fees that arise from such problems.
Real Estate Is Filled with Complicated Concepts:
It is not just the real estate terms that are complicated. Buying and selling a home is very complicated, because it is an emotional roller coaster ride. In order to succeed with the purchase or the sale of a home, you need to understand how real estate works, you need to know how the current economic market impacts your sale, you need to learn to think like a buyer, if you are a seller; and think like a seller, if you are a buyer. And you need to understand how to manage the stress, which is part of every real estate transaction.
The emotional roller coaster ride is part of every sale. If you are selling a home, you may want to learn how manage the frustration and fear that occur during a sale. Watch The 4 Stressful Stages of Selling a Home on YouTube, to learn valuable tips and strategies to get through the 4 stressful stages of selling a home.
You also need a great real estate agent who can assist you with all of the important real estate terms so you do not have to figure it out yourself. A great agent will be the one who knows how to put together the right contract to get you through the sale. They know how to negotiate the best terms for you. They educate you on what to expect as you go through a transaction. You want an agent who has the ability to communicate with you and everyone involved in your sale so you do not have to experience confusion or fear about whether they know what they are doing.
And if you are thinking about buying or selling a home in San Diego, feel free to contact me for advice and assistance. I love educating my clients on the important real estate terms, how the process works, and I love helping you through the sale with the least amount of stress and frustration.
Dr. Deena Stacer
I have a real estate license and a PHD in psychology. I combine my expertise in real estate and my understanding of psychological real estate strategies to help you have less stress and hassle when you sell your home. If you have questions about this article or any real estate questions, feel free to schedule a time to chat with me or you can email or text me. I am happy to answer any questions about selling or buying a home or any other real estate terms. I can help you determine the value of your home and I can educate you about numerous ways to value of your home as all as knowing what to expect as you go through the 4 stages of selling your home and buying one. Email me at [email protected]. 858-229-8072
Dr. Deena: The Doctor That Makes House Calls! Realty One Group-CA-BRE 00703471
If you have found this information helpful, be sure to check out more valuable videos on my YouTube channel. Go to YouTube- type in the magnifying glass: Dr Deena Realtor. Here are a few videos you can want to watch to educate yourself about the buying and selling process:
I have successfully worked with families from all walks of life who hired me to buy or sell a home. I have worked with families going through lifestyle transitions such as a divorce, the death of a loved one, families relocating, and couples downsizing or experiencing the loss of income.
I offer you my compassion, my expertise, and valuable strategies to help you make or save the most money, with the least amount of hassle when you buy or sell a home, and I help you reduce your stress while guiding you every step of the transaction as well as getting your thorough the jungle of real estate terms.
If you or a family member need assistance with your real estate questions and buying or selling a home in San Diego, feel free to contact me to answer all of your questions. My email is [email protected]. My phone/text is 858-229-8072.