Real Estate Lingo Made Simple: What Buyers and Sellers Need to Know

Let’s face it—real estate has its own language. Whether you’re buying your first home, selling after two decades, or considering an investment property, you’ve probably come across terms that made you pause and Google.

But understanding the language of real estate doesn’t have to be complicated. Below is a straightforward guide to some of the most common terms you’ll encounter, explained in plain English—so you can navigate the process with clarity and confidence.

Appraisal

What it is: A professional estimate of a home’s market value, typically conducted by a licensed appraiser.
Why it matters: Lenders use the appraisal to ensure they’re not loaning more than the home is worth. If a property appraises lower than the offer price, it can impact financing or renegotiation.

Contingency

What it is: A condition in a purchase agreement that must be met for the sale to proceed.
Why it matters: Common contingencies include home inspections, financing approval, or the sale of the buyer’s existing home. These clauses offer legal protections but can also influence timelines.

Equity

What it is: The difference between your home’s current market value and the amount you still owe on your mortgage.
Why it matters: Building equity means building wealth. It can be leveraged when you refinance, sell, or invest in another property.

Escrow

What it is: A neutral third party that holds funds and documents during the transaction process.
Why it matters: Escrow protects both buyer and seller by ensuring no money or title changes hands until all conditions are met.

Pre-Qualification vs. Pre-Approval

Pre-Qualification: A rough estimate of how much you might be able to borrow, based on unverified info.
Pre-Approval: A more solid figure, based on verified financial documents, indicating how much a lender is willing to loan.
Why it matters: Pre-approval shows sellers you’re a serious buyer and can make your offer more competitive.

Title Insurance

What it is: Insurance that protects you and the lender if someone later claims ownership of the property.
Why it matters: It ensures you have clear, undisputed ownership once the sale is final.

Closing Costs

What they are: Fees paid at the end of a real estate transaction—typically 2%–5% of the purchase price.
Why they matter: These can include lender fees, title insurance, taxes, and more. Budgeting for these in advance can prevent last-minute surprises.

Earnest Money

What it is: A good-faith deposit from the buyer that shows commitment to the deal.
Why it matters: If the buyer backs out without a valid reason, this money may be forfeited. If the deal goes through, it’s applied to the purchase price.

MLS (Multiple Listing Service)

What it is: A database of properties listed for sale, accessible to licensed real estate professionals.
Why it matters: It’s the most accurate, up-to-date source of property information available, and essential for visibility when listing your home.

Active Under Contract vs. Pending

Active Under Contract: A seller has accepted an offer, but contingencies still need to be resolved.
Pending: All contingencies have been satisfied, and the transaction is moving toward closing.
Why it matters: If you’re a buyer, understanding these statuses tells you whether it’s worth submitting a backup offer.

Why It All Matters

Buying or selling a home is one of the most important financial moves you’ll ever make. Understanding the key terms used throughout the process can help you make confident, informed decisions—and avoid costly missteps.

And remember: you don’t need to know everything. That’s what your real estate professional is here for.

Have questions about a real estate term you’ve heard but don’t quite understand? Feel free to reach out—I’m happy to help clarify and guide you through the process.