20 Most Important Terms for Real Estate Agents

Gulshan Ansari G

In the real estate sector, it is very important to know certain terms for homebuyers and investors. In this article, we will highlight a few of them. Read this article to find out more.

Whether you’re buying or selling a home, the given information will help you learn the vocabulary.

Down payment: The down payment is the amount paid by the homebuyer during the closing period. Most home loans require a 20% down payment, while several conforming loans only require a down payment of 5%. There are also loans offered by the Federal Housing Administration (FHA) that accept a 3.5% down payment.

Appraisal: An appraisal is required to gather the estimated value of a piece of real estate. During the home sale, the mortgage lender sends out an appraiser to get a professional opinion of the value of the property. This helps the lender decide if the property is worth the amount of the loan the potential buyer is seeking.

Capitalization Rate (Cap Rate): The annual rate of return for an investment property expressed as a  percentage.

Contingency: An escape clause is a provision in a contract that allows one or both parties to terminate the agreement under specific conditions.

Credit Score: A three-digit number lenders use to measure an individual’s creditworthiness. The higher the score, the more likely it is that the individual will be approved for a loan and receive a lower interest rate.

Deed: The document that transfers ownership of a property.

Equity: The difference between the current market value and the amount still owed on the mortgage.

Income Property: A property rented out to generate income instead of being occupied by the owner.

Interest Rate: The price paid for borrowing money expressed as a percentage over time. This is typically used in context with mortgages, car loans, etc.

Mortgage: A loan that uses real estate property as collateral to repay the debt. 

Mortgage Insurance: An insurance policy protects the lender against total loss of interest and principal.

Foreclosure: The legal process where a lender reclaims a defaulted property that has been used as collateral for a loan.

Fair Market Value (FMV): One of the key real estate terms and definitions all agents should be familiar with is fair market value, which is an accurate representation of a property’s value or worth. Simply put, it is the price a property would be able to sell for on the open market, under the condition that the buyer and seller are both well-informed 

Blind offer: When a buyer makes an offer on a property they haven’t seen, even when it was possible to see it, that offer is considered a “blind offer”. It is most commonly used in a highly competitive area and/or circumstance, and used as an attempt to be first and win quickly.

Buyer’s Agent/Listing Agent: A buyer’s agent, also known as a selling agent, is a licensed real estate professional whose job is to locate a buyer’s next property, represent their interests by negotiating on behalf of that buyer to obtain the best price and purchasing scenario for that buyer as possible.

The listing agent, also known as the seller’s agent, is a licensed real estate professional whose job is to market the seller’s property, and to represent the seller’s best interest by negotiating on behalf of the seller to secure the best price and selling scenario as possible. This agent is a fiduciary for the seller.

Buyer and listing agent commissions are typically 2-3% of the contract price in each sale.

regarding the property, are acting in their best interests, and are not pressured for whatever reason to complete the transaction.

Appraisal Contingency: An appraisal contingency is a clause wherein a buyer may cancel a home whose appraisal value does not exceed the selling price.

Listing: A listing is a written agreement, contract, or arrangement for the marketing and selling of real property through a broker or real estate agent for a specific period. It gives an agent sole authority to handle the sale of the property in exchange for a fee or commission for their services.

In Summary

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