Real Estate Terms Every Northeast Arkansas Buyer and Seller Should Know

Real estate transactions involve a lot of terminology. Whether you're buying your first home, selling a property, purchasing land, or exploring an investment opportunity, understanding common terms can make the process easier to follow.

Here's a simple guide to some terms you may encounter during a real estate transaction.

Appraisal

An appraisal is an opinion of a property's value prepared by a qualified appraiser.

An appraisal may be required by a lender as part of a financed transaction. It is different from a comparative market analysis prepared by a real estate professional.

Closing

Closing is the stage when the parties complete the transaction and the required documents are signed and processed.

The exact closing process can vary depending on the transaction.

Comparative Market Analysis

A comparative market analysis (CMA) is an analysis prepared by a real estate professional using information about comparable properties.

Sellers may use a CMA when considering a listing price.

A CMA is not the same thing as an appraisal.

Contingency

A contingency is a condition that must be satisfied according to the terms of a real estate contract.

Examples can include inspection, financing, appraisal, or the sale of another property.

The specific contingencies depend on the contract.

Earnest Money

Earnest money is money deposited according to the terms of a purchase agreement to demonstrate the buyer's commitment to the transaction.

The contract determines how the earnest money is handled.

Equity

Equity generally refers to the difference between a property's value and the amount owed against it.

For example, if a property is worth $250,000 and the owner owes $175,000 on a mortgage, the difference is $75,000.

Actual equity calculations can involve additional factors.

Escrow

Escrow generally refers to money or documents being held by a neutral third party according to agreed-upon terms.

The exact meaning and use of escrow can vary depending on the transaction.

Inspection

A home inspection is an evaluation of a property's condition performed by an inspector.

An inspection is different from an appraisal. An inspection generally focuses on property condition, while an appraisal addresses value.

Listing Agreement

A listing agreement is an agreement between a property owner and real estate brokerage establishing the terms under which the brokerage will market and represent the property.

The specific terms are contained in the agreement.

Multiple Listing Service

A Multiple Listing Service (MLS) is a system used by real estate professionals to share property listing information.

MLS participation and rules can vary by organization and market.

Pre-Approval

A mortgage pre-approval is a lender's preliminary assessment of a borrower's potential qualification for financing based on information provided to the lender.

A pre-approval is not a guarantee of final loan approval.

Property Disclosure

A property disclosure provides information about known conditions or characteristics of a property, as required by applicable law and transaction documents.

Disclosure requirements can vary, so sellers should consult appropriate professionals regarding their specific situation.

Title

Title refers to the legal rights associated with ownership of property.

A title search may be performed to identify ownership information, liens, easements, and other recorded matters.

Title Insurance

Title insurance is insurance that may protect against certain covered title-related risks, subject to the policy's terms, exclusions, and conditions.

Questions about title insurance should be directed to a qualified title or insurance professional.

Under Contract

When a property is under contract, the buyer and seller have entered into a purchase agreement, subject to its terms and any applicable contingencies or conditions.

Being under contract does not necessarily mean the transaction has closed.

Due Diligence

Due diligence is the process of investigating a property and transaction before completing a purchase.

Depending on the property, this may include reviewing:

• Property condition
• Title
• Survey
• Zoning
• Easements
• Leases
• Utilities
• Financial information

The appropriate due diligence depends on the type of property and transaction.

Easement

An easement generally gives someone a legal right to use a portion of another property for a specified purpose.

Common examples can involve access or utilities.

Recorded easements can affect how property is used.

Zoning

Zoning refers to regulations governing how property may be used and developed.

Requirements vary by location and property.

Buyers should verify current zoning and permitted uses with the appropriate local authority.

Understanding Real Estate Terms Makes the Process Easier

Real estate terminology can seem complicated at first, but understanding the basics can make conversations with your REALTOR® and other professionals easier.

Whether you're buying or selling in Paragould, Jonesboro, Greene County, Craighead County, or another Northeast Arkansas community, don't hesitate to ask questions when you encounter an unfamiliar term.

A good real estate professional can explain terms related to the transaction and help you understand when another qualified professional should be consulted.