Real estate comes with its own language. Here's a plain-English reference for the terms you'll run into most often while buying or selling a home.
Collective income from everyone in your household before taxes or other deductions are taken, including investment income or dividends, Social Security benefits, alimony, and retirement fund withdrawals.
A written justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby.
The difference between the agreed purchase price and a lower appraised value. Buyers may need to cover this gap in cash if they still want to proceed at the agreed price.
An appraiser's assessment of a property's worth, based primarily on comparable sales. The most recent comparable sale usually comes closest to the final purchase price.
The annual percentage rate, expressed as a yearly rate averaged over the full term of the loan. APR includes lender fees, so it's usually higher than your mortgage interest rate.
A licensed real estate agent who represents the buyer's interests throughout a transaction, from the search through closing.
Generally 2 to 5 percent of the sales price, including lender fees, recording fees, transfer taxes, third-party fees such as title insurance, and prepaids and escrows such as homeowner's insurance, property taxes, and HOA fees.
A document that provides an itemized listing of the funds paid or disbursed at closing.
A report comparing a property to similar recently sold, active, and pending homes nearby, used to help determine a fair asking or offer price.
A condition written into the purchase agreement that must be met for the sale to proceed. Common contingencies include financing, inspection, and home sale. If the condition isn't met, the buyer can typically walk away without penalty.
The number of days a property has been actively listed for sale, a key indicator of how the local market is moving.
The legal document conveying title to a property.
A cash payment of a percentage of the sales price that buyers pay at closing. Different lenders and loan programs require various down payment amounts, such as 3 percent, 5 percent, or 20 percent of the purchase price.
Also known as an escrow deposit, this is a dollar amount buyers put into an escrow account after a seller accepts their offer, showing the seller they're entering the transaction in good faith.
Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.
A homeowner's financial interest in a property, equal to the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.
Putting something of value, like a deed or money, in the custody of a neutral third party until certain conditions are met.
A fee required when you buy a home located within a community with an HOA, typically covering maintenance and improvements of common areas and use of amenities.
Part of the closing costs of a home purchase, which may include an application fee, attorney fees, and a recording fee. The lender's underwriting or origination fee is usually 1 percent of the loan amount.
A licensed real estate agent who represents the seller and markets the property for sale.
A legal contract between a seller and their listing agent that authorizes the agent to market and sell the property under agreed terms.
Mortgages have different terms ranging from 10 to 30 years and are available with fixed or adjustable interest rates. Your lender can discuss down payment, credit requirements, and other specifics of various loan types.
A database used by real estate brokers to share information on properties for sale, giving agents and their clients access to the most complete and up-to-date listing data.
A loan from a bank, credit union, or other financial institution that relies on real estate for collateral. The bank provides money to buy the property, and the borrower agrees to monthly payments until the loan is fully repaid.
Insurance that protects the lender and repays part of the loan if the borrower defaults and the loan can't be fully repaid on a foreclosure sale. Usually required on loans with less than a 20 percent down payment.
The point in a transaction when both the buyer and seller have signed and agreed to all terms of the purchase agreement. This is the official start date for most contingency timelines in Washington State.
The amount a seller actually walks away with after subtracting commissions, closing costs, and the remaining mortgage balance from the final sale price.
Insurance required by most lenders when a buyer puts down less than 20 percent, protecting the lender if the borrower defaults. Usually added to the monthly payment and removable once enough equity is built.
Pre-qualification is a quick estimate of borrowing power based on self-reported information, with no documents verified. Pre-approval is a formal lender review including a credit check and document verification that gives you a confirmed borrowing limit, and is required before making an offer in most situations.
Expenses paid at closing for bills that aren't technically due yet, such as property taxes, homeowner's insurance, mortgage insurance, and HOA fees.
Typically imposed by local governments on real property, including residential real estate. The tax rate can change annually, and the assessed value of your property is usually recalculated annually.
A tax imposed by Washington State, and sometimes local jurisdictions, on the sale of real property, typically paid by the seller. The rate is tiered based on the sale price.
A policy that protects the buyer and lender against losses from defects in the property's title, such as unknown liens, ownership disputes, or errors in public records. Usually purchased once, at closing.
Terms indicating a property has an accepted offer and is in the process of closing, though contingencies may still need to be resolved.