Opendoor
  • Sell
  • Buy
  • Buy & Sell
Sign In

5 real estate terms you should know

Real estate lingo can be complicated. Here are five terms to know that might come in handy the next time you buy or sell a home.

JF

Jean Folger

9/21/2022 · 4 min read

Curious what your home is worth?

Get an offer in minutes, sell in a matter of days.

Find out

Spotlight

No, you can't buy a house overnight. Here's how long it usually takes

Sarah Sharkey

Key takeaways

  • Dual agency is when one real estate agent represents both sides of a transaction.

  • Earnest money is a good faith deposit the buyer pays when making an offer.

  • An easement is a right to use someone else’s land for a specific purpose.

  • Pre-approval happens when a lender reviews and confirms your financial details to determine how much you can borrow.

  • Pre-qualification is an estimate of what you can afford to spend on a home.

New to the home buying or selling scene? The real estate terms you may encounter can seem intimidating, adding confusion to an already intricate process. Here are five terms that may be helpful to understand.

1. Dual agency

In many real estate transactions, there are two agents: one to represent the buyer and one to represent the seller. This may help avoid any potential conflicts of interest that might arise during negotiations.

However, sometimes one real estate agent operates as both the buyer’s agent and seller’s agent in the same transaction. This is often called “dual agency” (although some states use different terminology). Dual agency is illegal in some states, and agents should disclose their agency status to buyers and sellers in transactions.

2. Earnest money

An earnest money deposit is a good faith deposit you pay when making an offer to buy property to show the seller you’re serious about buying the home. The amount may be negotiable, but it’s often about 1% to 2% of the sale price. 

The seller’s broker or a title company usually holds the money until closing. Then the money may be credited toward your down payment or closing costs. Earnest money may be refundable if the seller backs out or you cancel for an approved contingency. However, you might lose the deposit if you change your mind for non-contractually agreed-upon terms, or if you ignore the contract timeline.

3. Easement

An easement is the right to use someone else’s property for a specific purpose that both parties agree to. For example, an easement might allow you to walk across your neighbor’s yard to access a nearby lake. Easements are not a form of ownership; instead, they merely grant the use of the property.

Easements aren’t usually deal-breakers for buyers, but it can be helpful to know to make an informed decision. Sellers should disclose any known easements, and you can check for easements with a title search or property survey during the due diligence period.

4. Pre-approval

Mortgage pre-approval indicates an estimate of your home buying budget, interest rate, loan term, and monthly payment. This lets you focus on homes in your price range and may help you make stronger offers (and can indicate to sellers that you’re serious about buying).

To get pre-approved, you submit financial information that can include income, tax returns, and pay stubs, which your lender reviews and substantiates along with your credit history. Timelines vary by lender, but it usually takes 1–3 days, though you might wait longer to hear back from some lenders. 

Remember, just because you receive a pre-approval letter from a lender, does not guarantee that you will later be approved for a loan.

5. Pre-qualification

Pre-qualification is a less formal (and sometimes less reliable) estimate of your home-buying budget. The lender asks for financial information, but it won’t verify anything or do a credit check. Instead, the lender provides a rough estimate of what you can afford to spend on a home based on the information you provide.

While pre-qualification can be a good first step in the home-buying process, it doesn’t carry as much weight as a pre-approval letter since the lender hasn’t verified your self-reported information.

Remember, just because you receive a pre-qualification letter from a lender, does not guarantee that you will later be approved for a loan.

This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.

JF

Jean FolgerAuthor

Jean Folger is a researcher, editor, and writer with more than 15 years experience, specializing in real estate and personal finance. Her goal is to help people make better financial decisions, so they have more money and time to spend on the things that matter most. ​In the past, she has been a real estate broker, an English teacher, and a trip leader for an adventure travel company.

JG

Jena GreeneEditor

Jena Greene is the Managing Editor at Opendoor. She covers real estate, personal finance, money management, and market best practices. Jena is passionate about empowering people to find their dream homes and making the home-buying process a delightful one.