# 5 real estate terms you should know By Jean Folger | 2022-09-21 > Real estate lingo can be complicated. Here are five terms to know that might come in handy the next time you buy or sell a home. ## Key Takeaways ## Key takeaways - Dual agency is when one real estate agent represents both sides of a transaction. - Earnest money is a good faith deposit the buyer pays when making an offer. - An easement is a right to use someone else’s land for a specific purpose. - Pre-approval happens when a lender reviews and confirms your financial details to determine how much you can borrow. - Pre-qualification is an estimate of what you can afford to spend on a home. **Meta title:** 15 Common Real Estate Terms Every Buyer Should Know | Opendoor **Meta description:** Learn 15 common real estate terms every home buyer should know. This quick glossary covers essential home buying vocabulary from appraisal to escrow. Buying or selling a home comes with a whole new language. From "escrow" to "contingency," real estate terminology can feel overwhelming — especially if it's your first transaction. This home buying vocabulary guide breaks down 15 common real estate terms in plain English so you can navigate every step with confidence. Think of it as your home buying terms glossary, whether you're preparing to make an offer or [getting ready to sell](https://www.opendoor.com/articles/how-to-sell-your-house). [Get your offer](#) ## Quick-Reference Table: All 15 Real Estate Terms at a Glance | **Term** | **One-Line Definition** | | **Appraisal** | A professional estimate of a home's market value | | **Closing** | The final step where ownership officially transfers to the buyer | | **Closing costs** | Fees and expenses paid on top of the home's purchase price at closing | | **Comparative market analysis (CMA)** | A report comparing similar recently sold homes to estimate a property's value | | **Contingency** | A condition that must be met before a real estate deal can close | | **Down payment** | The upfront cash a buyer pays toward the purchase price | | **Earnest money** | A deposit that shows a buyer is serious about purchasing a home | | **Equity** | The portion of your home's value that you actually own | | **Escrow** | A neutral third-party account that holds funds during a transaction | | **Home inspection** | A professional evaluation of a home's physical condition | | **Mortgage** | A loan used to finance the purchase of a home | | **Offer** | A buyer's formal proposal to purchase a home at a specific price | | **Pre-approval** | A lender's conditional commitment to loan you a specific amount | | **Title insurance** | A policy that protects against disputes over property ownership | | **Under contract** | The status of a home after a seller accepts an offer but before closing | ## Your Home Buying Vocabulary Cheat Sheet If you're a first-time buyer, building your home buying vocabulary early can save you confusion (and stress) later. The 15 real estate terms below cover the concepts you're most likely to encounter — from your first pre-approval letter to the closing table. Bookmark this home buying terms glossary and refer back to it as you move through the process. Already own a home and thinking about selling? These terms apply to your side of the transaction, too. ## Key Real Estate Terms to Know Before You Buy or Sell ### 1. Appraisal An appraisal is a licensed professional's opinion of a home's fair market value, based on the property's condition, features, and recent comparable sales in the area. Mortgage lenders require an appraisal to confirm the home is worth the amount they're lending. If the appraisal comes in lower than your offer price, you may need to renegotiate or cover the difference out of pocket. **Why it matters:** An appraisal protects you from overpaying. Learn more about [how long an appraisal takes](https://www.opendoor.com/articles/how-long-does-an-appraisal-take) and [what the process involves](https://www.opendoor.com/articles/home-appraisal-tips-and-what-is-home-appraisal-based-on). ### 2. Closing Closing is the final step in a real estate transaction. It's the meeting (or digital process) where all documents are signed, funds are transferred, and ownership of the property officially passes from seller to buyer. Closing day typically involves reviewing and signing a stack of legal and financial paperwork. **Why it matters:** Understanding the timeline helps you plan. Here's a closer look at [how long closing takes](https://www.opendoor.com/articles/how-long-does-closing-take) and the [closing process for sellers](https://www.opendoor.com/articles/house-closing-process-for-seller). ### 3. Closing Costs Closing costs are the fees and expenses — beyond the home's price — that buyers and sellers pay to finalize a transaction. For buyers, these typically include lender fees, title fees, and prepaid taxes or insurance. Closing costs generally range from 2% to 5% of the home's purchase price. **Why it matters:** These costs can add up to thousands of dollars. Budget for them early. See a detailed breakdown of [closing costs for sellers](https://www.opendoor.com/articles/how-much-are-closing-costs-for-seller) and learn about [how much it costs to buy a house](https://www.opendoor.com/articles/how-much-does-it-cost-to-buy-a-house). ### 4. Comparative Market Analysis (CMA) A comparative market analysis is a report that estimates a home's value by comparing it to similar properties that recently sold nearby. Real estate agents prepare CMAs to help sellers set a listing price and help buyers make competitive offers. **Why it matters:** A CMA gives you a data-driven starting point for pricing decisions. Explore [how to determine your home's value](https://www.opendoor.com/articles/how-to-determine-home-value) and the [factors that influence it](https://www.opendoor.com/articles/factors-that-influence-home-value). ### 5. Contingency A contingency is a condition written into a real estate contract that must be met before the sale can proceed. Common examples include financing contingencies (the buyer must secure a mortgage), inspection contingencies, and appraisal contingencies. If a contingency isn't satisfied, the buyer can typically back out without penalty. **Why it matters:** Contingencies protect both parties. Learn the difference between [contingent and pending](https://www.opendoor.com/articles/contingent-vs-pending) status. ### 6. Down Payment A down payment is the portion of a home's purchase price that you pay upfront in cash rather than financing through a mortgage. Down payments typically range from 3% to 20% of the purchase price, depending on the loan type. **Why it matters:** The size of your down payment affects your monthly payment, interest rate, and whether you'll need private mortgage insurance. Find out [how much to save for a down payment](https://www.opendoor.com/articles/how-much-to-save-for-house). ### 7. Earnest Money Earnest money is a good-faith deposit a buyer makes after an offer is accepted. It signals to the seller that you're serious about the purchase. The deposit is typically 1% to 3% of the purchase price and is held in an escrow account until closing, when it's applied toward your down payment or closing costs. **Why it matters:** Without earnest money, sellers may not take your offer seriously. Read more about [how earnest money works](https://www.opendoor.com/articles/earnest-money). ### 8. Equity Equity is the difference between your home's current market value and the amount you still owe on your mortgage. For example, if your home is worth $400,000 and you owe $250,000, you have $150,000 in equity. Equity builds over time as you pay down your loan and as your home appreciates in value. **Why it matters:** Equity is one of the biggest wealth-building tools of homeownership — and a key factor when you decide to sell. ### 9. Escrow Escrow is a neutral arrangement where a third party temporarily holds money or documents during a real estate transaction. During the buying process, your earnest money is placed in escrow. After closing, your lender may maintain an escrow account to collect and pay property taxes and insurance on your behalf. **Why it matters:** Escrow protects both the buyer and seller by ensuring funds and documents are handled fairly. ### 10. Home Inspection A home inspection is a thorough examination of a property's physical condition — including the roof, foundation, plumbing, electrical, and HVAC systems. It's typically conducted after an offer is accepted and before closing. **Why it matters:** An inspection can uncover costly problems before you commit. See [what home inspectors look for](https://www.opendoor.com/articles/briefs/what-do-home-inspectors-look-for) and review this [home inspection checklist for buyers](https://www.opendoor.com/articles/home-inspection-checklist-for-buyers). ### 11. Mortgage A mortgage is a loan from a bank or lender that allows you to purchase a home by borrowing a large portion of the purchase price and repaying it over time — usually 15 or 30 years — with interest. The home itself serves as collateral for the loan. **Why it matters:** For most buyers, a mortgage is the single largest financial commitment they'll make. Understanding your loan terms is essential. ### 12. Offer An offer is a buyer's formal written proposal to purchase a property at a stated price and under specific terms. The seller can accept, reject, or counter the offer. A strong offer often includes pre-approval documentation, a reasonable earnest money deposit, and clearly defined contingencies. **Why it matters:** Your offer sets the tone for the entire negotiation. Learn [how to determine what to offer on a house](https://www.opendoor.com/articles/how-to-determine-what-to-offer-on-a-house). ### 13. Pre-Approval Pre-approval is a lender's written statement confirming that you qualify for a mortgage up to a specific amount, based on a review of your credit, income, and financial history. It's more rigorous than pre-qualification and carries significantly more weight with sellers. **Why it matters:** A pre-approval letter shows sellers you're a serious, qualified buyer — giving you an edge in competitive markets. ### 14. Title Insurance Title insurance is a one-time policy that protects the buyer (and their lender) against legal claims or disputes over property ownership. Before issuing a policy, a title company conducts a search of public records to identify any existing liens, easements, or ownership issues. **Why it matters:** Without title insurance, you could be financially responsible for ownership disputes that predate your purchase. ### 15. Under Contract A home is "under contract" when the seller has accepted a buyer's offer, but the sale hasn't closed yet. During this period, both parties work through contingencies such as inspections, appraisals, and loan finalizations. **Why it matters:** Understanding this status helps you navigate the timeline between offer acceptance and closing day. Get the full breakdown of [what "under contract" means](https://www.opendoor.com/articles/under-contract-meaning). ## Frequently Asked Questions About Real Estate Terms ### What are the most common real estate terms? The most common real estate terms include closing, mortgage, appraisal, contingency, escrow, down payment, and equity. These come up in virtually every home purchase or sale and are worth understanding before you begin the process. ### What vocabulary should I know before buying a home? At a minimum, familiarize yourself with pre-approval, earnest money, contingency, closing costs, home inspection, and escrow. These terms will appear in nearly every conversation with your lender, agent, and title company. ### What does contingent mean in real estate? Contingent means a seller has accepted an offer, but certain conditions — like a satisfactory home inspection or the buyer securing financing — must still be met before the sale is final. Learn more about [contingent vs. pending](https://www.opendoor.com/articles/contingent-vs-pending). ### How much are closing costs? Closing costs typically range from 2% to 5% of the home's purchase price. On a $350,000 home, that's roughly $7,000 to $17,500. Buyers and sellers each pay different portions. See a full breakdown of [closing costs for sellers](https://www.opendoor.com/articles/how-much-are-closing-costs-for-seller). ### What is the difference between pre-qualification and pre-approval? Pre-qualification is an informal estimate based on self-reported financial information. Pre-approval involves a full credit check and document review by a lender, resulting in a conditional loan commitment. Pre-approval carries far more weight when making an offer. ### How much earnest money should I offer? Earnest money deposits typically range from 1% to 3% of the purchase price, though this varies by market. In competitive markets, a larger deposit can strengthen your offer. Read our full guide on [earnest money](https://www.opendoor.com/articles/earnest-money). ### What does equity mean for homeowners? Equity is the portion of your home you truly "own" — the difference between your home's market value and what you still owe on your mortgage. It grows as you make payments and as your property appreciates. ### How long does it take to close on a house? A typical closing timeline ranges from 30 to 60 days after an offer is accepted, depending on financing, inspections, and any contingencies. Cash offers can close significantly faster. Here's a detailed look at [how long closing takes](https://www.opendoor.com/articles/how-long-does-closing-take). [Get your offer](#) ## The Bottom Line Learning these 15 common real estate terms is one of the simplest ways to feel more prepared and confident — whether you're buying your first home or selling one you've lived in for years. Bookmark this glossary, share it with your partner or co-buyer, and revisit it anytime you hit an unfamiliar term during your transaction. **Ready to put these terms into action?**[Get a free, no-obligation offer from Opendoor](https://www.opendoor.com/articles/how-selling-to-opendoor-compares-to-a-traditional-home-sale) and see what your home is worth today. --- *Originally published at [https://www.opendoor.com/articles/briefs/5-real-estate-terms](https://www.opendoor.com/articles/briefs/5-real-estate-terms)*