6 Real Estate Terms You Should Know

February 18, 2021

Let's clear up some confusion around some common real estate terms and industry jargon

Real estate impacts every one of us at some point in our lives, yet the industry is shrouded in jargon that creates confusion for the average person. You can’t confidently buy, sell, or invest in real estate without a basic understanding of the words you see in every property transaction. 

I’ll save you a little time and research by defining six of the most commonly confused terms and phrases you’re sure to encounter as an active member of the real estate world.

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    • What is Title Insurance?

      Title insurance protects lenders and buyers from financial loss if there are defects in the title. Title insurance protects policyholders in case there are past defects on a title like:

          • Ownership by another party
          • Forgery, fraud, or incorrect signatures
          • Incorrect records
          • Restrictive covenants or easements
          • Encumbrances, judgments, or liens against a property

      A clean title is essential to a real estate transaction, but title searches are not infallible, and sometimes, things fall through the cracks. If you purchase a property and then find out after closing that the previous owners defaulted on property taxes, that burden falls on you, unless you have title insurance. 

      There are two types of title insurance policies. Lenders will typically require buyers to purchase a lender’s title insurance policy to protect the lender from financial loss. Smart buyers will also require sellers to purchase an owner’s title insurance policy to protect themselves against title defects too. 

      Once a property purchase agreement is signed, a title company closing agent will initiate the insurance process. The four major, national title insurance underwriters are: 

          • Fidelity National Financial
          • First American Title Insurance Company
          • Old Republic National Title Insurance Company
          • Stewart Title Guaranty Company
          • Plus regional companies

      Depending on the location, transaction price, and insurance company, a title insurance policy can cost anywhere from $500 to upwards of $3,500. Typically sellers pay for the owner’s policy which protects the new buyers after closing.

      What Does Pending Mean in Real Estate?

      Say you find your dream home online, but your query is met with the word “Pending” splashed across the cover photo. Pending in real estate means that a buyer submitted an offer and the seller accepted. 

      However, that does not mean that the transaction is closed. Between the time that a pending label is assigned to a property and the property sells, the home still has to undergo an inspection, the buyer still may have to secure a mortgage, and the buyer still might have multiple chances to cancel the sale. 

      If you have your eyes on a property that is pending, not all hope is lost. A seller cannot accept any new offers when a property is pending, even if they are higher than the accepted one. You and your agent can submit a backup offer. If the original offer falls through, the seller can consider yours instead. 

      What Does Contingent Mean in Real Estate?

      A contingent listing is very similar to a pending listing, but contingent status happens before pending status. For an accepted offer to be contingent, typically means that the buyer must sell another property in order to purchase a new one. The offer is “contingent” on the sale of the buyer’s other property. Offers that are contingent on the sale of another are not necessarily desirable to a seller, however in a slow market it might be better than no offer at all.

      A contingent listing is usually still considered an active listing which means the seller can accept new offers if the terms of the contingency are not met. The MLS (multiple listing service, discussed below) classifies contingent listings as UC Contingent/Call Listing Broker, which means that the seller has accepted an offer, but other buyers can continue visiting the listing and submitting offers. A smart listing broker will most certainly insert a “kick-out clause'' in the contract which means if the seller receives another offer within the contingent sale time-frame, the buyer in 1st position can get “kicked out” within a certain number of days (usually 48 or 72 hours) if they can’t perform regardless—of the contingency.

      What Is The MLS in Real Estate?

      The MLS, or multiple listing service, is a tool that helps real estate brokers cooperate to secure buyers for their listings and advertise their listings to agents who might represent buyers looking for like properties. 

      Here’s an example of how the MLS facilitates connections. Broker A posts his property listing on the MLS. Broker B finds the listing and thinks it’s a great fit for her buyers. Broker A is willing to split part of his commission with the buyer’s agent. Broker B sets up a showing and the client decides to buy. 

      The MLS ensures that listings can be easily found by brokers that might be working with buyers in the local area. It allows local brokers access to all other MLS member broker’s listings to assist in placing listings in front of interested buyers that may be working with their own brokers rather than the listing broker.

      Real estate professionals pay for their membership to the MLS, but searching it is available to the public free of charge. Most MLS’s feed broker’s listings to syndicated to 3rd party websites through the MLS listing feeds, such as Trulia, Zillow & Realtor.com. Many local, independent and unaffiliated brokers rely on these feeds as their sole means of marketing property.

      What does PUD mean in real estate?

      A PUD, or planned urban development, is a self-contained development consisting of residential, commercial, or residential and commercial units. PUDs are common in condominium buildings, single-family, or townhouse communities. PUDs include amenities or businesses to serve the residents, like stores, restaurants, or even landscaping services. 

      PUDs are less restrictive than HOAs, or communities with a home owner’s association. In an HOA community, there may be rules imposed on all residents to maintain conformity. However, in a PUD, you have the right to do whatever you want to your individual property or lot and shared rights in a common area. 

      What does REO mean in real estate?

      REO, or real estate owned, properties have fallen under the ownership of a lender or an investor. If someone defaults on their loan payments, the lender can sell the property at an auction. If the property doesn’t sell, it’s still in the lender’s possession and deemed an REO property. 

      Foreclosure is not the only way that a property can become REO. If the previous owner moves out or passes away at the end of a reverse mortgage. If the heirs refuse to pay off the mortgage balance, the lender or investor gets the property back. 

      Buying an REO property often comes with an appealingly low price point. However, you usually get what you pay for, which means the property might need repairs. REO properties are usually sold as-is so be prepared for renovations if you decide to purchase.

      Other Questions?

      Real estate doesn’t have to be confusing – the right agent won’t let it be. If you have any other questions about real estate terms or want a second article like this one, let me know. You can find me on social media @coloradocountrybroker or contact me with the info below.