Understanding Real Estate Words & Language

As you prepare to buy a home, you may hear or read some words that are less familiar to you but are words of the trade within the real estate industry. At times it may even feel as if your real estate agent is speaking a different language. If this happens to you, don’t be shy about asking your agent to explain what something means and how this relates to what you’re doing. Buying a home is one of the biggest purchases made my most people. It’s essential that you understand what you read and what is discussed. Today’s blog post reviews some common real estate words and what they mean.  

ESCROW

Escrow refers to funds, also known as earnest money, being held by a neutral third party. The funds are placed in an escrow account that is held and managed by this third party. The funds stay in this account until it’s time to complete the sales transaction and the funds are then disbursed per the agreement terms.

Escrow accounts are commonly used in real estate but these can also be used for another transactions which require an agreement between a buyer and a seller or requires time to inspect what is being purchased.

EARNEST MONEY

Now, that we understand more about escrow, what exactly is the earnest money being held in the escrow account? Earnest money is the deposit funds a buyer makes when signing a purchase agreement with a home seller. This good-faith money shows the buyer is serious about following through with the purchase. These funds are usually a percentage of the total purchase price. At closing, the earnest money deposited does get credited towards the buyer’s purchase of the home.

TITLE INSURANCE

This type of insurance provides coverage for mortgage lenders and homebuyers against any problems with the property’s deed after ownership is transferred. For instance, the title insurance protects you if the person selling the home doesn’t have the proper authorization to hold the property title. Title insurance additionally provides protection from liens, ownership disputes, falsified documents, and encroachments.

OPTION PERIOD  

The option period refers to real estate option contracts and the time period where buyers have the unrestricted right to terminate a contract. These are agreements between the homebuyer and seller. During this time period, after your offer is accepted during which you take a closer look at your new home, if you find red flags or major issues during the option period, you can terminate the purchase and get your earnest money deposit back from the seller.

WALKTHROUGH

A walkthrough is the buyer’s final visit to a home before the buyer completes the sale at the closing. Some may think doing a final visit isn’t necessary but as your real estate agent I always encourage buyers to do a walkthrough. This gives you an opportunity to see that the home is in the same condition as when you agreed to purchase it and it gives you the opportunity to see that any agreed upon repairs or updates were completed. Oftentimes, a walkthrough will be scheduled the day before or the day of the closing.

As always, if you hear or read a term that you’re unsure of, let’s talk about it. It’s essential for both sellers and homebuyers to understand the general process of what’s taking place. If you’re looking to buy, sell, or lease, I invite you to reach out today.

Since 2004 Sara Lyn Nguyen continues to bring a wealth of knowledge and expertise about buying and selling real estate around the Houston area to those she serves. Sara is a multi-year award winning REALTOR® and relocation specialist where her clients trust her to have up-to-date information on the real estate market. She has been one of Gary Greene’s Multi-Million Dollar Top Producers, and citywide was the #2 Top Producing agent in 2020, #3 in 2021, and #2 in 2022. When it’s time to buy, sell, invest, or relocate speak with a trusted professional knowledgeable in the homes and neighborhoods of Fort Bend/Sugar Land and the surrounding region.