Real Estate Terms You’ve Heard But Might Not Understand

by Sheri Espinosa

A friendly guide for homebuyers and sellers from The Espinosa Group

Navigating the real estate world can feel like learning a new language. Whether you're a first-time buyer, a seasoned homeowner, or somewhere in between, you've probably heard terms tossed around like “escrow,” “contingency,” or “earnest money”—but didn’t feel 100% sure what they meant.

The truth is, real estate doesn’t have to be confusing. With the right team and a little clarity, you can feel informed and empowered every step of the way.

So, let’s break it all down. Here are some of the most commonly used real estate terms—translated into plain English so you can move forward with confidence.

📄 1. Escrow

What it sounds like: Some kind of financial holding tank.
What it actually is:
Escrow is a neutral third-party account used to hold money and paperwork during a real estate transaction. It ensures that both the buyer and the seller fulfill all parts of the agreement before any money changes hands.

📌 Example: Once your offer is accepted, your earnest money goes into escrow until closing. If something falls through due to a contingency, that money can be refunded.

⏳ 2. Contingency

What it sounds like: A “just in case” clause.
What it actually is:
A contingency is a condition in the purchase agreement that must be met for the sale to go through. If a contingency isn’t satisfied, the buyer (or seller) may back out without penalty.

📌 Common contingencies:

Inspection contingency: You can cancel if the home has major issues.
Appraisal contingency: Protects the buyer if the home doesn’t appraise at full value.
Financing contingency: If your loan falls through, you’re not locked in.

💰 3. Earnest Money

What it sounds like: A down payment—but different.
What it actually is:
Earnest money is a deposit made to show you’re serious about buying a home. It’s typically 1–3% of the purchase price and goes into escrow.

📌 Why it matters: If you back out of the deal without a valid reason, the seller may keep this money. If everything goes smoothly, it’s applied toward your down payment at closing.

🏡 4. Appraisal

What it sounds like: A guess at how much the house is worth.
What it actually is:
An appraisal is a professional estimate of a home's value, ordered by the buyer’s lender to ensure the property is worth the loan amount.

📌 Tip: If a home appraises below the agreed price, you may need to renegotiate—or come up with the difference in cash.

🏘️ 5. HOA (Homeowners Association)

What it sounds like: Neighborhood rule enforcers.
What it actually is:
An HOA is a private organization that manages and maintains shared spaces in a community, such as parks, pools, or landscaping. They often have rules (called CC&Rs) to keep the community looking uniform.

📌 Be sure to ask: What are the monthly dues? What do they cover? Are there restrictions (pets, rentals, parking, paint colors)?

🧾 6. Closing Costs

What it sounds like: A surprise bill at the end.
What it actually is:
Closing costs are all the fees and expenses involved in finalizing a home purchase. They typically range from 2% to 5% of the purchase price.

📌 What they include:

Loan origination fees
Title insurance
Appraisal & inspection fees
Escrow fees
Property taxes (prorated)
Recording fees

💡 Pro Tip: In some markets, buyers can negotiate for the seller to cover part of these costs.

📝 7. Title & Title Insurance

What it sounds like: A legal term you’ll never need to worry about.
What it actually is:
The title proves legal ownership of a home. Title insurance protects you (and your lender) against claims from previous owners—like unpaid taxes or unresolved disputes.

📌 Why it matters: It’s a one-time fee that can save you from future legal trouble.

🏦 8. Pre-Approval

What it sounds like: A soft yes from a lender.
What it actually is:
Pre-approval means a lender has reviewed your income, credit score, and debts and has conditionally approved you for a loan of a specific amount.

📌 Why it's important:

It shows sellers you're serious.
It gives you a realistic home-shopping budget.
It can help you move faster in a competitive market.

🔁 9. Pending

What it sounds like: The home might still be available.
What it actually is:
When a listing is “pending,” it means the seller has accepted an offer, and the sale is in process. Typically, all contingencies have been met, and the deal is close to closing.

📌 Can I still make an offer? Sometimes, but it’s rare. If you love the home, ask your agent to keep an eye on it in case the deal falls through.

📅 10. Days on Market (DOM)

What it sounds like: Just a number on the listing.
What it actually is:
DOM refers to how many days a property has been listed for sale. A high DOM may indicate an issue (like pricing or condition). A low DOM often signals high interest and quick movement.

📌 Why it matters: If a home has been on the market for a while, there may be room to negotiate. If it's brand new, you may face multiple offers.

🤔 Bonus Terms You Might Hear

FSBO: For Sale By Owner—no listing agent involved.
Under Contract: Offer accepted, but sale isn’t final yet.
Dual Agency: One agent represents both buyer and seller (not legal in all states).
Equity: The difference between what you owe and what your home is worth.

💬 Don’t Worry—We’ll Talk You Through It

At The Espinosa Group, we make real estate simple and stress-free by explaining every term, step, and strategy. Whether it’s your first home, your forever home, or your investment property—we’re here to educate, advocate, and guide you.