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  • About
    • All About Theory
    • Meet the Team
    • Theory Companies
    • Theory Cares
    • Fill The Barrel
    • Blog
  • Buy
    • Buy With Theory
    • 2023 Homebuyer Guide
    • Home Buyer Bus Tour
    • Your Guide to the PNW
    • Featured Listings
    • Home Search
    • Sign In
  • Sell
    • Sell With Theory
    • Free Home Estimate
    • 1 Hour Cash Offer
    • Sold By Theory
  • Invest
    • Theory Investments
    • Theory Self-Directed IRA
  • Construction
  • Property Management
  • Careers
  • Contact

5 Real Estate Terms You May Not Know

If you’re unfamiliar with real estate terminology, the home buying process can feel overwhelming and confusing. Contingency? Earnest money? Escrow? What do these mean and how do they apply to you?! Let’s go over 5 real estate terms you may not know. Once you have a basic understanding of real estate terms like these, you can proudly showcase how much you know when communicating with industry professionals and bonding with friends who are also homeowners. 

Disclaimer: There is a LOT more to learn about buying a home beyond these terms. Join us for our Home Buyer Bus Tour to get answers to all your questions and more! 

Term 1: Contingency

Real estate terms you may not know

The first real estate term you may not know is contingency. A contingency defines a condition that must be met in order for a contract to become binding. In the case of a real estate offer, a contingency may include something that could prevent the sale from closing.

Some buyers will make an offer contingent upon the sale of their own home. In this case, they can back out of the deal if their home goes on the market and doesn’t sell. Contingencies also usually include time frames that act as deadlines. For example, a buyer can make an offer contingent upon inspection. If the seller accepts their offer, they would then schedule an inspection within the time frame specified in their contract. If the inspection results indicate the house is in need of too many repairs, the buyer can back out of the deal.

 

Term 2: Earnest Money

The second real estate term you may not know is earnest money. Earnest money is an important part of the home-buying process. It’s essentially a deposit that shows the seller that you intend to purchase their property. It also shows that you’re a committed buyer, and it helps fund your down payment.

Typically, earnest money is paid 1-3 days after the seller has accepted your offer. The more earnest money you put down, the stronger your offer looks. This is because you have “more skin in the game.” In Washington state, typical earnest money is anywhere from $1,000 to 10% of the purchase price.

When you submit earnest money, the deposit goes into an escrow account. This money then applies toward your down payment once the sale of the home is complete. If you back out of the sale due to a failed contingency, you can recover your earnest money in full. However, if you back out of the sale for reasons NOT covered by contingencies, your earnest money will be forfeited. Before signing a purchase and sale agreement to buy a home, carefully review it with your real estate agent to understand how much earnest money you’ll pay, and how to successfully recover your money if you need to back out of the sale.

 

Term 3: Escrow

Real estate terms you may not knowThe third real estate term you may not know is escrow. In a real estate transaction, escrow is a legal arrangement in which a third party temporarily holds money or property until a particular condition has been met. It protects both the buyer and the seller throughout the home buying process.

Title and Escrow companies facilitate a real estate transaction. From the initial earnest money deposit to final funding, they ensure it is a smooth process. Additionally, once the transaction is complete, a lender may set up an escrow account on your behalf, which will hold funds for taxes and homeowner’s insurance.

 

Term 4: Title

The fourth real estate term you may not know is title. When real estate professionals talk about “title,” they are referring to who has legal ownership and the right to use a piece of property. As a buyer, you will receive a copy of the preliminary title report from a title company within a week after reaching mutual acceptance.

The report identifies all parties with a legal claim to the property, what items need to be cleared from the title before you can take possession, and if there are any easements or encroachments on the property.

Ultimately, title companies protect you from purchasing a home that you would not be able to sell in the future. Once the transaction closes, you will receive a final title policy, recording your name as the new legal owner along with the principal loan amount.

 

Term 5: Closing Costs

Real estate terms you may not know

The final real estate term you may not know is closing costs. Closing costs are fees that you pay at the closing of a real estate transaction. These fees cover items associated with the sale of the home, like title and settlement services, appraisal, lender fees, and other services carried out during closing.

Closing costs are typically 2–5% of the home’s price. However, you can negotiate who pays them! Depending on what type of market you find yourself in, the seller can pay for part or all of your closing costs. Sometimes, you can roll the closing costs into the price of the mortgage loan. But you often pay these fees outright at the completion of the sale of the property. 

 

If you have any questions about the home buying process, feel free to shoot us a message anytime!

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“I think that’s the easiest it’s ever been for me to buy or sell a home!”

Brad Rasmussen -

“

We had a distressed property in Tacoma that required a lot of repair before we could sell. The task soon became overwhelming and that’s when we contacted Theory Real Estate.  They purchased the property “as is”. Within 3 weeks,  we closed on the deal. The Theory team is amazing!!  Every person we came in contact with was friendly, professional and efficient.

John and Diane Simchuk -

“

We are new investors to this market. We met Isaac and Alan through a good friend, and we are so thankful to have met them. They are the nicest, caring, most professional, kind-hearted people we have met in a long time. We would recommend these guys to ANYONE.

Anthony & Sarah Wooden - Tacoma

“

We have bought 2 homes and sold 1 home with Theory. We would recommend them to all our friends.

Rhonda & Rickey Wilks - Buckley

“

We worked with Theory to find our perfect house, but ran into a couple obstacles with the seller. The Theory team was always there with answers and went above and beyond all of our expectations.

Ceirra & Kenny Williams - Spanaway

LET'S GET SOCIAL

THIS Saturday!! The path to becoming a homeowner s THIS Saturday!! The path to becoming a homeowner starts with getting WSHFC Certified for Down Payment Assistance & learning EVERYTHING you need to know about how to turn your dreams into a reality 💡Our very own Nickie Robbs along with Katie Arnold from Evergreen Home Loans will be your experts for the day as they answer questions, clarify myths, & provide the roadmap you need 😎Snacks will be provided, and the class will be held IN PERSON from 10AM - 4PM! Successful completion earns you official WSHFC Certification for Down Payment Assistance Programs in WA State 🏡 💰If you'd like to attend, please email karnold@evergreenhomeloans.com!📍 217 N Meridian, Puyallup (next to Meridian Cafe and Trackside Pizza, parking is in the back)
🗓 Saturday, May 27th
⏰ 10AM - 4PM
Happy Birthday to Jessica Helms, our Assistant Pro Happy Birthday to Jessica Helms, our Assistant Property Manager with Love My Space! She's been with us for the last 6 months and has been a truly wonderful person to have around. She gets stuff done and has become an invaluable member of the team! Happy Birthday Jessica, we hope you have an amazing day 🥳 🧁
Started the week off right yesterday with a class Started the week off right yesterday with a class from our CFO Erik about personal finance! He talked all about how to set up yourself and your family for a less financially stressful life, from now through retirement. We're always looking for ways like this to help bring extra value to our Team on a regular basis 😎The biggest takeaway from the class? Every great budget starts with a specific, well thought out system. And if you're curious to learn more about how to make THAT happen, you might just have to join our team and come to the next one 😉
Today we're celebrating the birthday of the one-an Today we're celebrating the birthday of the one-and-only Madison "Two Hands" Magruder! Mads has been around since just about the beginning, and was an integral part of the company throughout its early years. We're blessed to have her hang her RE license with us still, and we wish her the best possible day 🙌🥳💃
Happy Birthday, Rizwan! 🎂 We hope you have the Happy Birthday, Rizwan! 🎂 We hope you have the most special day!!
If I were you, I wouldn't pass on this charming Cr If I were you, I wouldn't pass on this charming Craftsman home in Aberdeen with an unmatchable value that you won’t find at this price!!📍 2215 Cherry St
💰 $345,000
👣 1,743
🛏 4
🛁 1.75This beauty features a HEATED 720SQFT SHOP WITH LOFT along with an attached 2-car garage & NEW ELECTRIC PANEL! On the main floor you will find the large Primary BR w/ slider to the back deck – as well as an additional BR, Bath and den/office space. 2 Beds & 1 Bath upstairs. Truly one of a kind, displaying handcrafted woodwork throughout: revitalized fir floors, redwood & old-age cedar counter tops, knotty pine ceilings, exposed post and beam, and custom fencing surrounding the property for added privacy. Driveway/street parking in front, alley access with SECURE GATED ENTRY, RV parking; enough for 6+ vehicles in back! Immaculate landscaping with back deck/patio.
RUN! Dont Walk to take a look at this stunner in p RUN! Dont Walk to take a look at this stunner in person!📍 5024 84th Avenue W
💰 $690,000
👣 2,206 sqft
🛏 4
🛁 3Welcome to this stunning mid-century modern home ideally situated on a serene dead-end street in desirable University Place! With 4 beds, 2.5 baths, multiple living spaces each with a fireplace, fenced back yard, front courtyard, and a 2-car garage, it's really easy to just come home and relax! The open kitchen seamlessly blends with the dining space, creating an inviting atmosphere & the primary bedroom is large & offers an en suite! Don't forget about the AC keeping you cool this summer! The location of this home in UP is highly desirable, offering a peaceful neighborhood ambience while being just moments away from urban conveniences. Nearby, you'll find great schools, trendy shops, delicious restaurants, and picturesque parks!
Incredibly inspiring night with Mike Smith! What w Incredibly inspiring night with Mike Smith! What was your favorite takeaway from this month's Tacoma Connect? 👇

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