Real Estate Terms Every Texas Homeowner Should Know

Basic vocabulary to advance your knowledge as a seller or serious buyer in the Midland-Odessa and Johnson County real estate markets.

Navigating the Texas real estate market can sometimes feel like deciphering a foreign language. From industry-specific acronyms to complex legal terms, there’s a collection of real estate vocabulary that can leave even the most seasoned homebuyers or sellers scratching their heads. To help simplify the process, The Sales Team has compiled a list of the top real estate terms and created easy-to-understand definitions. So, let’s dive in and decode the jargon!

Appraisal

An appraisal is a professional estimate of a property’s value. These are performed by a licensed appraiser that is based on factors such as a property’s condition, location, size, and recent sales of comparable properties in the area. Appraisals are typically required by lenders to determine the amount they are willing to offer for a loan.

 

Comparative Market Analysis (CMA)

A Comparative Market Analysis (CMA) is a report prepared by a real estate agent or appraiser to determine a property’s market value. (Like a book report for your home!) It compares the property to similar recently sold properties in the area to estimate a fair and competitive listing price. CMAs provide valuable insights for sellers to set the right asking price and for buyers to make informed offers.

 

Covenants, Conditions & Restrictions (CC&Rs)

This one can be a little intimidating, so let’s break it down. Usually, there are rules and regulations placed on a property by a homeowner’s association (HOA) or possibly by a PUD or city. The CC&Rs share what requirements and limitations there are for the homeowner of that property. So, consider CC&Rs the real estate commandments for your particular property.

 

Closing Costs

Long story short, these are fees that you have accrued over your buying or selling journey. Closing costs include charges like title insurance, attorney fees, appraisal fees, inspection fees, and loan origination fees.

Pro Tip: In a “Buyer’s Market,” many sellers will pay a percentage of the closing costs. However, in a “Seller’s Market,” buyers are typically expected to cover them on their own.

 

Down Payment

This one is pretty simple. A down payment is the initial upfront payment made by a buyer toward the purchase of a property. It is usually a percentage of the total purchase price and is paid in cash. The remaining amount is typically financed through a mortgage loan, and the size of the down payment affects the loan amount, interest rates, and the buyer’s eligibility for a loan.

 

Due Diligence

Your agent will negotiate an Option Period in the initial offer and contract for the property. This time period, usually a week or two, allows the buyers to roll up their sleeves and do some research before fully committing to their new home purchase. They may purchase inspections and tests on the property. Based on what they find, buyers may attempt to negotiate repairs to be completed by the seller or renegotiate the terms of the contract. Or, they have the option to walk away altogether within the Option Time Period.

 

Earnest Money

Earnest money—sometimes known as a “good faith deposit”—is a certain percentage that buyers will put down when writing an offer to show the seller that they are serious about purchasing. (Think of it this way: If buying a house were a game of poker, this is when you decide to throw in some chips so the other players know you’re ready to throw down.)

Earnest money can be refunded before a specific deadline if the buyer chooses to back out for any reason. But once you hit that deadline—or you offer hard earnest money (meaning, no refund whatsoever)—then the money belongs to the seller. These funds can add up to 1-5% of the listing price.

 

Equity

The magic word in any growing market. Equity is the difference between the market value of a property and the outstanding balance of any loans or mortgages. As homeowners make mortgage payments or as property values increase, equity grows. It represents the owner’s financial interest in the property and can be used for future borrowing or as a measure of net worth.

 

Escrow Holder

“Escrow” is a fancy term for “safety deposit box”. This is a process where a neutral third party, typically an escrow agent or company, holds funds and important documents related to a real estate transaction. It ensures that both the buyer and seller fulfill their contractual obligations before the property is transferred. The funds are held in escrow until all the agreed-upon terms and conditions are met.

 

Foreclosure

Ah yes, the f word. When a homeowner can no longer make their mortgage payments, foreclosure is the process where a lender typically repossesses the property and attempts to sell it. This is a last resort to pay back the amount that the homeowner can no longer maintain as a source of collateral.

 

Home Sale Contingency

This is when a buyer lets the seller know that the purchase of the seller’s property relies on the sale of the buyer’s own home. That’s not really a big problem in a seller’s market, but it can be in a buyer’s market.

When a purchase contract is “contingent” upon the sale of the buyer’s home, the seller may continue to market their property and attempt to secure a backup offer(s). If the seller is successful in obtaining a better offer, they will give their first buyer notification and a choice. The 1st buyer will have the option of removing their contingency and moving forward with their purchase, or terminate the purchase contract, receive a refund of their Earnest Money, and move forward with finding another home.

 

Listing

A listing refers to a property that is officially on the market and available for sale or rent. It includes key details like the property’s price, size, features, and other relevant information. Listings can be found on multiple platforms, including real estate websites, brokerage databases, and multiple listing services (MLS).

 

Multiple Listing Service (MLS)

The Multiple Listing Service (MLS) is a comprehensive database used by real estate agents and brokers to share information with other real estate agents and brokers about properties that are on the market. It provides a centralized platform where real estate professionals can access and search for listings, view property details, and cooperate with other agents in buying or selling properties.  These MLS databases are often “syndicated” with real time data feeds to public real estate websites such as Realtor.com and Zillow.

 

Seller Disclosure

State property codes (laws) require that sellers disclose all of their knowledge about the features, amenities, and condition of their property to the prospective buyers. It should include known deficiencies or items in need of repair, presence of flood zones, etc. A fully completed Seller Disclosure helps protect the seller from a buyer later claiming that the seller hid problems. The SD also helps the buyer by being informed about property conditions when negotiating a contract to purchase. Buyers beware! In spite of receiving the Seller Disclosure, buyers should still complete their own Due Diligence (see above!)

 

Understanding real estate vocabulary is crucial for anyone entering the market. Remember, if you ever have questions or need assistance, don’t hesitate to reach out to The Sales Team. We’re here to educate you on how to successfully navigate the housing market!