Real Estate Glossary: Common Terms Every Buyer and Seller Should Know

Buying or selling a home can feel like learning a new language. From contracts and financing to inspections and negotiations, the real estate process is filled with industry terms that may be unfamiliar to first-time buyers and sellers. In order to make this easier, we’ve put together a Real Estate Glossary that breaks down common terms and concepts in plain English.

Pre-Approval vs. Pre-Qualification

These two terms are often confused, but they are not the same thing. A pre-qualification is a basic estimate from a lender of how much you may be able to borrow based on information you provide. A pre-approval, on the other hand, is a more detailed review of your finances that carries greater weight when making an offer on a home. Sellers often view pre-approved buyers as more serious and financially prepared.

Contingency

A contingency is a condition written into a purchase agreement that must be met before the transaction can move forward. Common contingencies include financing, inspections, and appraisals. For example, a buyer may include an inspection contingency that allows them to renegotiate or cancel the contract if significant issues are discovered during the home inspection.

Earnest Money

Earnest money is a deposit made by the buyer after an offer is accepted. This deposit shows the seller that the buyer is serious about purchasing the home. The funds are typically held in escrow and later applied toward the buyer’s closing costs or down payment. If the buyer backs out of the contract for reasons not covered by contingencies, they may risk losing the earnest money deposit.

Escrow

Escrow refers to a neutral third party that holds funds and important documents during a real estate transaction. Escrow helps ensure that both the buyer and seller fulfill their contractual obligations before money and ownership officially change hands. This process adds security and transparency to the transaction.

Appraisal

An appraisal is a professional estimate of a home’s market value, usually required by a lender during the financing process. If a home appraises for less than the agreed-upon purchase price, the buyer and seller may need to renegotiate the terms of the deal. Appraisals help lenders confirm that the property is worth the amount being borrowed.

Closing Costs

Closing costs are the fees and expenses paid at the end of a real estate transaction. These can include lender fees, title insurance, taxes, escrow fees, and attorney or recording costs. Buyers and sellers each have different closing expenses, so it is important to review estimated costs early in the process to avoid surprises at closing.

Days on Market (DOM)

Days on Market, often shortened to DOM, refers to how long a property has been actively listed for sale. A lower DOM can indicate strong buyer demand, while a higher DOM may suggest pricing, condition, or market-related challenges. Understanding DOM can help buyers and sellers better evaluate local market conditions.

Knowledge Creates Confidence

Real estate transactions involve many moving parts, but understanding the terminology can make the process far less intimidating. Whether you are buying your first home, selling a property, or simply exploring the market, learning the language of real estate can help you make more informed decisions.

At The John Schuster Group of Coldwell Banker Realty, we are committed to helping clients feel confident every step of the way. Reach out to us today to connect with a trained professional who can help get you started on your own real estate journey!

Looking for the best real estate agent to sell your home in the Twin Cities? Established in 2004, the John Schuster Group with Coldwell Banker Realty has sold over 5,800 homes and earned 600+ 5-star Google reviews. Named the #1 listing agent statewide with Coldwell Banker for 10 years, we help homeowners sell for top dollar through strategic pricing, high-impact marketing, and access to qualified buyers. If you’re wondering what your home is worth in today’s market, our team provides accurate pricing and proven results across Minneapolis, St. Paul, and surrounding suburbs.