Real estate isn’t the easiest thing you can be acquainted with. There’s a lot of terminologies, aspects, and even sub-classes of it that can quickly overwhelm the average person.
It’s really not surprising: Long-standing industries like that have their own glossary of terms to consult to make transactions easier. If you have no idea what someone is talking about when they ask “do you know any 1031 exchange companies here in Nevada?”, here’s a quick guide to some of the real estate’s most confusing terms:
Escrow Accounts
You may have heard this being talked about when it comes to payment. That’s because escrow accounts are special accounts that are set up by someone to receive money from a buyer’s monthly payments.
Equity
This word pops up a lot in contracts; it’s simply legalese for “ownership,” or how much of the property that you have you actually own. It’s the amount you’ve paid for the house versus how much it’s worth, so if you’re paying a $100,000 cabin and you’ve settled about half of it, you have $50,000 in equity.
1031 Exchange
It may sound strange to hear something so specific used as jargon, but it’s because 1031 exchanges are fairly common. It’s a way to avoid huge amounts of capital gain tax. Essentially, people selling property will often cover the legal fees for closing the property, but they can waive that by investing in something similar to what they’ve already sold.
Refinancing
If you’ve ever paid off a house, you’ll encounter this word a lot. This means restructuring your home loan with a different rate and payment structure; therefore, lowering the cost of their overall mortgage.
CMA
A Comparative Market Analysis is a set of data compiled, which generates a value report about the houses in the area where the property in question is. This is done so you can get a more realistic and accurate view of how much the house is worth.
Brokers and Realtors
These are the people you’ll encounter when buying a property. It’s important to not confuse the two. A broker is a real estate agent that’s passed their state’s qualifications for being a broker, while realtors are real estate agents that are members of the National Association of Realtors. Knowing the difference between the two can determine how good an agent is, as the NAR has a certain standard and code of ethics.
Liens
A lien is an interest someone else has in a property that you’ve just bought. This usually happens if the person who sold you the property has a debt to another individual that’s still in effect, and the house was used as part of that repayment. This can cause complications for you unless you get title insurance before you buy the property.
While this guide might not cover everything, these are the more tricky pieces of jargon that commonly pop up in the real estate world. It’s good to know what the experts are talking about. Who knows, you might be selling or buying a property in the future.
