7 Real Estate Questions You’ve Wanted to Ask

It doesn't matter whether you're buying, selling, or renting a house, real estate jargon can get overwhelming. To help you feel confident in any real estate scenario, Maleno thought it would be helpful to list the industry's most frequently asked real estate questions. Be sure to bookmark this page, as we'll be adding new definitions and explanations monthly.

1. What is an Appraisal?

An appraisal is an expert's opinion on a home's value. A lender will typically require an appraisal before approving a mortgage for a homebuyer to purchase or refinance a property. However, there are an increasing number of lenders that offer "no-appraisal" mortgages.

If you’re buying a home in cash, an appraisal isn’t required. However, unless you’re a seasoned real estate investor, the information it gives can help ensure you’re not making a poor decision.

2. What Does it Mean When a Home is Sold “As-Is?”

Sometimes buyers can negotiate with sellers to make certain repairs before closing. Other times, the seller makes it clear that the house is being sold "as-is." In this case, the property is for sale in its current state, meaning the seller will not address any problems before closing or entertain contingencies.

However, even when a home is sold as-is, the seller still needs to be truthful about the condition of the home. That said, if the seller doesn't know about any issues, they're not on the hook for finding them. This situation is common when buying from an investor who never lived in the home.

The rule in Pennsylvania and various other states is "caveat emptor," or "buyer beware." Simply put: If the pipes burst behind the wall seconds after the sale, it's the buyer's responsibility to fix the problem.

3. What is a Contingency?

In real estate, contingencies are criteria that a seller must meet before the buyer accepts the deal. The buyer can back out of the contract if these criteria aren't met. Common contingencies revolve around home inspections, mortgages, appraisals, and title searches.

For example, a buyer may request a home inspection before purchasing a property. If it's revealed there are serious issues with the home, they can back out of the contract if they've set up that contingency. If the inspection looks good, the deal is on.

In a "hot market," sellers typically won't entertain any contingencies. See section: "What Does it Mean When a Home is Sold "As-Is?""

4. What is Earnest Money?

When a buyer and seller enter into a purchase agreement, the seller has to take the property off the market. If the deal falls through, the seller has to relist the property and start the entire selling process again. While it may sound like a small effort, it's a massive burden when they're trying to sell their home quickly.

That’s why, when you want your offer on a property to stand out, you can put down money before closing on a house to show you’re serious about the purchase. These funds are known as earnest money or a “good faith” deposit.

If the sale doesn't happen, the seller keeps the earnest money, protecting them from the financial burden of temporarily taking their property off the market. If the deal happens, the earnest money is applied to the buyer's down payment and/or closing costs.

By and large, earnest money is between 1.00% - 3.00% of the purchase price. These funds are then held in an escrow account until the sale occurs.

5. What is Equity?

Equity is the difference between your home or property's value and how much you owe on your mortgage. For instance, if you put down $50,000 and borrowed $200,000 on a $250,000 house, your equity would be $50,000. As you pay down your mortgage, your equity increases.

Your equity can increase as a home appreciates. For example, let's say ten years later, your home is worth $300,000, and you have $140,000 left on your mortgage. Since equity is calculated by subtracting the principle owed from home value, you'd now have $160,000 in home equity.

Home equity is often a key element in net worth calculations. Further, once your home is paid off, you can leverage your equity as collateral for a home equity loan, home equity line of credit (HELOC), and cash-out refinancing.

6. What is an Escrow Account?

In the context of buying a home, "escrow" is a legal arrangement that protects both the buyer and seller throughout the translation process. Funds are deposited into an escrow account in a situation where a buyer has put down "good faith" or earnest money. The money is protected by a third party until the conditions of the sale are met.

For current homeowners, escrow accounts are also used to pay property taxes and insurance. To streamline your expenses, you can automate your escrow account to take out monthly funds and help you manage payments.

7. What is a Seller’s Market?

Since 2020, you've probably heard the phrase seller's market a lot. The reason being, homes have been selling faster and for more money than at almost any other time in history.

So, a seller’s market, or “hot market,” is a market condition characterized by a low supply of homes for sale met by a high demand for those homes. During these times, asking prices are often exceeded, few contingencies are demanded, and time-on-market is minimum.

Maleno: A Trusted Source

Maleno has been a regional real estate leader for over five decades. From custom building and remodeling to listing properties and helping buyers find their next home, we have a 360-degree view of the market and industry.

If you’re interested in learning more about what we do and how we can help, reach out today. Also, be sure to check back on this post for monthly updates. Here’s what we’re tackling next:

• What is a Buyer’s Market?
• What is a Home Inspection?
• What is a Closing?
• What is Appreciation?