The process of shopping for and purchasing a home is a unique experience. In fact, while house hunting, you may hear words and phrases that you have not heard before, and they may seem vague or confusing.
Below, we’ve collected a few commonly used words and phrases, along with their descriptions as they relate to the world of real estate. And remember, your real estate professional can explain everything in depth and answer all your questions.
Clean Offer
A clean offer on a home means that it has few contingencies — conditions that must be satisfied before the sale is completed. Contingencies give the buyer a legal way to back out of a transaction. Types of contingencies may include financing (the buyer could get out of a purchase contract if his or her loan is denied); inspections (the buyer could back out of the deal if the inspector finds serious problems); home appraisal (the buyer could have a chance to negotiate the price if the appraisal comes in below the purchase price); or the sale of a current home (the transaction is dependent on the sale of the buyer’s current home). These are just a few examples; there are no limits to how many contingencies can be put into a sales contract.
Detached Property
No, this doesn’t mean that the property lacks warmth and empathy. Detached properties are free of any shared walls, and they stand alone. Duplexes are often described as semi-attached properties and sometimes semidetached properties. According to the National Association of Realtors, Gen-Xers and baby boomers prefer detached, single-family homes and are willing to deal with a commute in exchange.
Fully Underwritten
“When an individual or business entity seeks funding for a real estate project or purchase, the loan request is scrutinized by an underwriter to determine how much risk the lender is willing to accept,” according to Investopedia. And in fact, Investopedia says that the term originated when a “risk-taker” would actually write his or her name under the total amount of risk that he or she was willing to accept. In the world of real estate, a mortgage underwriter approves or denies a credit request. A “fully underwritten” loan or approval means that the credit seeker has done all the necessary paperwork to have the loan approved, and the final approval is then subject to the appraisal and title work.
Hidden Gem
Have you come across homes for sale in “areas that are little-known, aren’t swarming with big institutional investors, and boast sizeable yields?” asks Business Insider. Then you have come across a hidden gem. “You probably know the ‘it’ areas — the neighborhoods and suburbs that everyone’s buzzing about. But what about the ones that are this close to being hot?” this Esurance blog post says. “Those are the ones where deals might still be had.” This may take some work, but with a great real estate professional who has knowledge of the area, you may just find that hidden gem.
Handyman Special
You may see phrases and words like “bring your contractor,” “fixer-upper,” or “as-is” on a property’s description. A handyman special means that the home needs works, and the price most likely reflects that. In some cases, you may not be able to move in due to structural or functional issues, but that is not always the case. A handyman special may need remodeling, or it could be a teardown. With a complete inspection, advice from your real estate professional, and a trusted contractor, you will have a better idea of what is in store if you are eyeing a property in this category.
Pocket (or Off-Market) Listing
A pocket listing, or an off-market home, is not listed on a Multiple Listing Service, a public collection of listings for sale in an area. Off-market homes are sold privately, either by the owner or with the assistance of a real estate professional. “Often off-market sales involve high-profile individuals within a community who don’t want the general public to know they are selling but want to get the word out through their agent’s network,” a Pacific Union real estate professional based in our Alameda office says. “With an off-market home, a home seeker can often write an offer and get it accepted by the seller, as the seller has set the price at what they will accept rather than an artificially lower price to create a bidding war.”
Single-Family Home or Residence
A single-detached dwelling is sometimes referred to as a single-family home or a single- family residence. These are stand-alone structures intended for one family, as opposed to a multiunit property such as a condominium or townhome structure. Is a single-family home right for you, or should you consider a condominium? SF Gate provides some pros and cons for each.
Skin in the Game
You may have heard this term in context of investing, and you may also hear it when it comes time to discuss your down-payment amount. What it means is that the more money you bring to the table, the more you risk. The more “skin in the game” you have, the less likely you are to walk away. The term was rumored to have been coined by renowned investor Warren Buffett, “referring to a situation in which high-ranking insiders use their own money to buy stock in the company they are running.”
Starter Home
Everyone has to start somewhere in real estate. A starter home may be a few things: on the small side, older, and/or in a neighborhood that is developing. That said, a starter home will usually be priced at the lower end of the price curve. You might think of millennials when you think of starter homes. According to Inman, “In 2017, millennials finally entered the housing market in force, comprising 71 percent of first-time buyers and 42 percent of all buyers who purchased a home in the last year.”
Sweat Equity
Equity is the value of a mortgaged property after deducting the loans against it. Sweat equity is the value you add to your property by improving it. In short, the increase in value has been obtained by labor. Feeling handy? The investment that nets the best returns is a kitchen renovation — 62 percent nationwide and more than 100 percent in the San Francisco and San Jose metro areas. Bathroom remodels bring returns of 50 percent nationwide and 90 percent in the San Francisco metro area.
Turnkey Property
A turnkey property means that it is move-in ready. And, by being move-in ready, the buyers assume that there are no structural issues and that everything — appliances, electricity, plumbing, and so on — is in working order. If you are considering a turnkey property, it most likely is priced accordingly. But this does not mean that you should skip an inspection. “Turnkey homes may sound great, but as with any other purchase, the buyer should always be on guard,” according to realtor.com.
These are just a few common words and phrases you may encounter as you enter the world of house hunting. Knowledge is power, so the more you know, the more prepared you will be to navigate the process. To learn more, check out realtor.com’s short guide to real estate lingo. Also, Inman.com has translations for 15 listing terms.
(Photo: iStock/sturti)