Every profession has its own language. You’ve likely stood there scratching your head at your mechanic, IT guy, or contractor. The same can be said for real estate. When buying a home, you’re likely to encounter brand new terms, and acronyms, that seem foreign to you. However, they play an important part in your real estate transaction.
That’s why it’s important to know what your agent means when he refers to, for example, an HOA fee or Earnest Money. So we’ve put together this list of real estate terms any New Orleans homebuyer should know. Bookmark this page, or save it for your records. When you’re ready to buy or sell a home, this list could help you save thousands of dollars and hours of confusion.
- Appraisal – A report that highlights the estimated value of the property completed by a third party. This helps the buyer know for sure that the property is worth what they are paying.
- Association Fee / HOA fee – Some housing communities (such as condos and townhomes) have a monthly fee associated with maintaining the commons areas and amenities such as pools. This is in addition to your mortgage.
- Closing Disclosure / CD – A form that itemizes all of the costs and fees as well as the distribution of all of the funds to and from buyer and seller.
- Closing Costs – Buyers and seller both have expenses associated with the home sales (beyond the actual cost of the home). For example, the buyer has a variety of fees connected to obtaining a new loan and the seller has commissions paid to real estate agents.
- Collateral – Something of value (in this case your home) that is held to ensure repayment of a mortgage or loan.
- Comparables – This is when similar homes (to the one you’re interested in) recently sold in the area where you’re looking to buy are reviewed. That way you get an idea of the value of homes in the area.
- Contingencies – These are the conditions that must be met for the real estate transaction to go through. An example would be an inspection of the home or the approval of the loan.
- Counteroffer – The response from the sellers in regards to your offer.
- Earnest Money – The deposit the buyer makes to the seller when they submit an offer. Upon closing the money will generally be applied to your down payment or closing costs.
- Escrow – Earnest money is typically held in “escrow” by a third party until the transaction closes. Escrow can also mean the time period from when the contract is written and accepted by the seller to when the home sale is completed.
- Principal – The amount of the loan which you actually borrowed separate from any accrued interest charges.
- REO – Real estate owned properties or foreclosed properties owned by a financial institution (like a bank).
- Short sale – When the seller’s lender is likely to accept (and allow) an offer for an amount less than the mortgage amount owed by the seller.
- Title – A legal document proving current and proper ownership of the property. Also referred to as a Title Deed, this document highlights the history of property ownership and transfers.
- Underwriting – When applying for a mortgage, this is when the potential home buyer is evaluated for their financial ability to obtain and repay a loan, normally consisting of a credit check and appraisal of the property. For title insurance, this is the process when historic documents are reviewed to determine if a title insurance policy can be issued and which conditions and exceptions will be included in that policy.
Use this list as a resource for all of your future real estate transactions. And when in doubt, make sure to reach out to reputable professionals in the Greater New Orleans area, who can guide you toward making the best decisions for your unique situation.