Common Real Estate Terms & Their Not-So-Common Explanations

---

An appraisal is like a report card for your house. When you're buying a house or selling, a professional called an appraiser comes to your house to check it out. They look at everything, like how big it is, what shape it's in, and where it's located. Then, they compare your house to other similar ones in your neighborhood to see how much it's worth.

This appraisal helps both the buyer and the bank (if there's a loan involved) make sure the house is priced fairly. It's like having a referee to say, "Yes, this house is worth what they're asking for," or "No, it's not worth that much." It's an important step in buying or selling a home to make sure everyone is paying or getting a fair price.

"Clear to close" is like the green light for buying a house. It means that all the necessary checks, paperwork, and approvals have been done, and everything looks good to go ahead and complete the purchase. 

Think of it as the moment in the home buying process when the bank or lender says, "Okay, we're all set to give you the money to buy the house, and there are no more obstacles or problems in the way." It's the final step before you officially become the owner of the home. So, when you hear "clear to close," it means you're almost there, and it's time to get ready to move into your new place!

Closing in real estate is like the finish line of a race when you're buying a house. It's the last step in the home buying process before the house officially becomes yours.

During the closing, you and the seller (and sometimes the real estate agents and lenders) get together to sign a bunch of important paperwork. These documents include things like the closing disclosure, the mortgage agreement if you're getting a loan, and various legal documents.

You'll also pay any remaining costs and fees, like the down payment, closing costs, and other expenses. Once all the papers are signed, the money is paid, and the deed is recorded (in NC), the keys to the house are handed over to you, and you become the proud owner of your new home. So, in simple terms, closing is the moment when you become the owner of the house you've been wanting to buy.

Closing costs are like the extra bills you have to pay when buying a house. They are the fees and expenses you need to cover when you're finishing up the process of purchasing a home.

These costs can include things like fees for the people who help with the sale and the people who process all the paperwork. You might also need to pay for things like inspections, appraisals, surveys, and taxes. There are also some fees associated with getting a mortgage loan, like loan origination fees.

Think of closing costs as the expenses that come with the final steps of the home buying process, on top of the price of the house itself and your down payment. It's essential to be aware of these costs because they can add up, so you'll want to budget for them when you're planning to buy a home.

A "Due Diligence Fee" is like a payment you make to reserve the right to carefully check out a house before you decide whether or not you want to buy it. It's part of the home buying process in some states.

When you pay this fee, the seller agrees not to sell the house to anyone else for a specific period, usually a few weeks. During this time, you have the chance to inspect the house thoroughly, get it appraised, and make sure everything is as you expected. If you decide not to buy the house for any reason, you might lose this fee, but it shows the seller you're serious about considering the purchase.

So, in simple terms, a due diligence fee is a payment that gives you the time and opportunity to investigate a house and make sure it's the right fit for you before you commit to buying it. The due diligence fee is subtracted from the purchase price and credited to buyer at closing.

A Due Diligence Request & Agreement (DDRA) form is used by buyers to request certain repairs or replacements of systems, items, or areas of the home that may have been found during the home buying process to be defective or in need of service. 

In North Carolina, homes are sold "as-is" per the standard Offer to Purchase & Contract. However, it's common for buyers and sellers to negotiate in good faith on some items that might be of particular importance to the buyers. These typically include areas of safety, structural integrity, and other conditions of the home that might make it difficult for the buyer to otherwise proceed confidently with the purchase of the home.

An "Earnest Money Deposit" is like a good-faith gesture or a sign of your commitment when buying a house. It's a sum of money you put down as a deposit to show the seller that you're serious about purchasing their property.

Think of it as a way to say, "I'm really interested in buying your house, and I'm willing to put some money on the line to prove it." This deposit is usually a portion of the overall price of the house and is held in an account until the sale is finalized. It's a way to reassure the seller during the home buying process that you won't suddenly change your mind or back out of the deal without a good reason.

If the sale goes through as planned, the earnest money is often applied to your down payment or closing costs. But if something unexpected happens, like you can't secure financing or there are issues discovered during inspections, you might get your earnest money back. So, in simple terms, it's a show of commitment in the home-buying process, and it can impact your deal depending on how things go.

Home inspections are like a thorough check-up for a house before you decide to buy it. It's when a trained and licensed professional, called a home inspector, goes through the house to look for any potential problems or issues.

During a home inspection, the inspector examines things like the foundation, roof, plumbing, electrical systems, and more. They check if there are any hidden issues that you might not have noticed when you first looked at the house. The goal is to make sure you know the true condition of the property during the home buying process.

Once the inspection is done, you'll receive a report that highlights any problems or concerns found. This report helps you make an informed decision about whether to proceed with the purchase as-is, negotiate repairs with the seller, or even reconsider buying the house if there are significant issues.

In simple terms, a home inspection is like getting a doctor's check-up for a house to make sure it's healthy and safe before you make it your home.

A pre-approval is like getting a green light from a bank or lender early in the home buying process that says, "Yes, we're willing to lend you a certain amount of money for the purposes of buying a house." It's an important step when you want to buy a home.

Here's how it works: You provide some financial information to a bank or mortgage lender, like your income, expenses, employment history, and credit history. They review this information and, based on what they find, they give you a rough idea of how much money they're willing to lend you for a home. This helps you know your budget and makes you a more attractive buyer to sellers because they see that you're serious and capable of securing a loan.

Remember, though, that pre-approval doesn't mean you have the loan yet. It's more like a strong indication that you're in a good position to get a mortgage when you find the right house. So, it's a helpful early step in the home-buying process.

The "settlement date" in simple terms is like the big day in the home buying process when you officially become the owner of a house you're buying. It's the date when all the paperwork is signed, and the money is transferred from you (or your mortgage lender) to the seller, and most importantly when the deed is transferred into your name. It can sometimes differ from the Closing Date if the deed is not recorded on the same day, due to some sort of delay.

On the settlement date, you get the keys to your new home, and it's yours to move into and enjoy. It's the exciting moment when the property legally changes hands, and you become the homeowner.

Being "under contract" in the home buying process is like saying, "We've made a deal and we've signed a contract but it's not quite final yet." 

When a house is under contract, it means that the seller has accepted an offer from a buyer, and both parties have agreed on the basic terms of the sale. However, the sale hasn't been completed yet. There could be some conditions and steps that need to be fulfilled before the deal is official, like inspections, financing approval, and (depending on the state) contingencies. 

During this time, the seller typically can't accept other offers from different buyers, but it's not a done deal until everything is sorted out and both parties sign all the necessary paperwork. So, "under contract" is a bit like being in the process of buying or selling a house, but it's not the final step of buying a house. In NC, verbal offers aren't binding but written offers are once they're signed by both parties and delivered to both parties.

You may see terms like "Contingent" or "Active Under Contract" on some websites listing homes. These are all different ways of saying pretty much the same thing. The home is under contract - but it might be accepting back up offers should the primary deal fall apart unexpectedly.