Buying or selling a home involves plenty of jargon. This glossary breaks it down simply.
A hot real estate market means you need to act fast if you want to buy a home. And that means needing to have a handle on plenty of the jargon that will be thrown around during the process of searching for a place.
Here are some easy to understand definitions to help you get started:
Sellers’ market
A sellers’ market is a real estate market where sellers have the advantage, because more people are looking to buy homes than sell homes.
When the demand exceeds the supply for homes, sellers have an easier time getting multiple offers because buyers have fewer properties to bid on, meaning they make more money on the sale. In a sellers’ market, people selling their homes also have more negotiating power when it comes to things like paying for repairs.
Buyers’ market
A buyers’ market is the opposite of a sellers’ market — it’s a situation where there are more people looking to sell their homes than there are people looking to buy homes.
In this scenario, a buyer has more power than a seller because the seller doesn’t have many options for who to sell to. Buyers can typically get a better price and negotiate to get more out of sellers.
Due diligence fees
A due diligence fee is negotiable amount that a buyer will pay to a seller to cover what’s called a due diligence period, the window of time a buyer has to have the home they’re looking at inspected and appraised and get approved for a loan.
They’re typically non-refundable, but the money paid is often credited to the buyer when the sale closes.
Earnest money deposits
Earnest money deposits are good faith payments to a seller from a buyer when bidding on a house. The amount is usually negotiable and credited towards the buyer’s expenses when the sale closes.
Home inspection
A home inspection is a process in which a home inspector examines a property that’s for sale to check for issues such as water damage and to make sure they’re aren’t issues with things like the foundation and electrical wiring.
They’re typically hired by buyers to check homes before a sale is finalized so that the seller may have to address any issues themselves.
Waiving an inspection
While home inspections are very common, some buyers may choose to waive any requirement that the home they’re purchasing be inspected before the sale, especially in a competitive market.
That means the buyer agrees to take on any problems with the home.
Buying ‘sight unseen’
Buying “sight unseen” means purchasing a home without seeing it in person first.
It’s a practice that’s more common in a hot market, when buyers feel pressure to move fast. It’s also become more common amid the COVID-19 pandemic, with more buyers opting for virtual home tours.
Sources: Rocket Mortgage, The Logan Group real estate firm, Investopedia, J. Blumen & Associates Real Estate Law, Title and Closing Services
