Real Estate Terms
Most professions have terms or phrases that are specific to their industry. They may even use some common words but they mean totally different things in the context of their work life. Abbreviations and slang are used in every day conversations in their office environment. But what if you’re an outsider? Would you know what they meant or would it be as if they were speaking in a foreign language? Here are 10 real estate terms that are commonly used in the industry that the consumer may not understand or know the meaning of, even if they think they do.
- CO – Certificate of Occupancy. In new construction (or a total “gut” renovation), the local authority (typically the Building or Codes division) will inspect the property when it is deemed to be complete. If they feel it is up to standards and complete enough to be occupied, they will issue a Certificate of Occupancy. Typically you will not be able to close on a new construction or totally renovated property if the Certificate of Occupancy or CO has not been issued.
- DOM – Days on Market. Different areas and MLS’s (see #3) may have different ways to calculate the number of days on market of a property. Most will either be from date of listing to date of contract OR date of listing to close date.
- MLS – Multiple Listing Service – not Major League Soccer. The MLS is where most real estate agents will enter a property that they have listed for sale. This is one of the places they will search to find properties that match Buyer’s criteria. Some areas have more than one MLS. This is important to know in case you live in an area that is close to more than one MLS that covers areas close by. You won’t want to miss out on potential Buyers because your agent is only a member of one MLS. Most MLS’s syndicate their listings to many other websites (like Realtor.com, Zillow, etc.) but you do not want to limit your exposure in any way.
- REALTOR©. (Pronounced REAL-TOR) This one may surprise you. Not all real estate agents are REALTORs. A person receives a license stating that they are allowed to represent Buyers and Sellers as a real estate agent. Only members of the National Association of Realtors are allowed to call themselves a REALTOR©. This is important because REALTORs must adhere to a Code of Ethics that real estate agents do not. See my blog “10 Questions to ask your Real Estate Agent” to read more about this.
- Pre-qual. Prequalification from a lender. A pre-qualification is not the same as a pre-approval. A prequalification is typically derived from a potential Buyer verbally stating income and debt information to a lender but the lender has not verified any of that information. A pre-approval is based on the Buyer filling out an application, perhaps submitting some supporting documentation, and the lender checking credit scores. A full approval, however, is not given until all the supporting documentation is provided and approved by the Underwriter.
- POA – Power of Attorney. If a party to the transaction is not able to be present at the closing, they can give Power of Attorney to someone else to be present and sign the documents for them. This document can be drawn up as part of a trust or estate, or a title company can draft one specifically for the individual property being sold or purchased.
- FSBO – For Sale by Owner. This typically means an owner is not represented by a real estate agent, however, this may not be entirely true. Some listing agreements are non-exclusive and it allows for either the owner or a real estate agent to advertise the property and find a Buyer. Also, this doesn’t mean that if you are a Buyer being represented by a real estate agent, that you can’t buy a house that is FSBO. A FSBO Seller may pay your real estate agent a commission. Some may not, however, so it is important to know that up front because if you have signed an agreement with your real estate agent to represent you, you may have to pay them at closing.
- Under contract. This term can be confusing. An offer is not the same as a contract. An offer is just that – an offer to purchase. There have been no agreements between parties. Under contract means that a Buyer and a Seller have agreed to all the terms of the offer and have signed and made it legally binding. This is important to know because if a property just has an offer, anyone else can submit an offer and can get the property under contract. If the property is under contract, anyone can submit an offer but cannot “steal” the house away from the party that has it under contract.
- Contingency. A contingency is a way for a party to be released from a contract. Most contingencies we see are for the Buyer (financing contingency, appraisal contingency, inspection contingency) but a Seller can have contingencies as well. Once the contingencies are satisfied or once a contingency deadline has passed, that contingency may not be used as a valid reason for contract termination unless both parties agree. You can read more about contingency types here.
- CMA – For you country music fans, this is not Country Music Association. It stands for comparative market analysis. A CMA is a snapshot of market value based on comparative properties. Your real estate agent can prepare this for you. It is important to note two things: 1. This is NOT an appraised value or the same thing as appraised value even though the price may be similar and; 2. Not all CMA’s will be the same. CMA’s are very subjective because a real estate agent chooses properties that they feel are comparable so different agents will likely choose different properties. It is important to ask if your agent used similar criteria that an appraiser would use to derive the proposed listing or purchase price. While most agents are not also appraisers, they should know some of the basic criteria that appraisers will use and, therefore, the price that they calculate should be very close to what an appraiser would give as value, provided the appraisal is done correctly (that’s another blog topic entirely)!
I hope this has cleared up some terms for you and will help you ask educated questions in the future when you are ready to buy or sell.
Michelle Froedge is a residential Realtor and Principal Broker in the Greater Nashville and Williamson County areas of Tennessee. “Mom” to four-legged fur baby, Tyler, Auntie to Zelamie, she is a vegetarian and sings in her spare time. Michelle has lived in Nashville and Franklin since 1997 and has been selling homes since 2004.