Note: These are not legal definitions. They are descriptive definitions meant especially for new home buyers or for buyers and sellers who want to be reminded of the home buying or selling process.

Application
Anyone interested in purchasing property can discuss loans with a potential lender and in a short conversation can learn enough to get an informal estimate of what kinds of loans are available to them, estimates of mortgage payment amounts, and what price range they should be considering for their budget. However, once a buyer is seriously ready and has chosen a lender, an application is the first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the loan underwriting process. This would hopefully lead to pre-approval, which makes the buyer a stronger candidate when making an offer. In some areas, such as the greater SF Bay Area, sellers will not even consider an offer without pre-approval.

Appraisal
This is a document prepared by a qualified and knowledgeable individual (an appraiser who is acceptable to the lender) that estimates the market value of a particular home. It is a formal and in-depth study involving a comparison of the prices of recently sold homes similar to a seller’s home in terms of location, style and amenities. An appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. A Comparative Market Analysis (CMA) is a more informal document done by a real estate agent to help sellers determine a sales price when putting their home on the market.

Back-up Offer
This is an offer that has been accepted by the sellers as second-in-line to a primary accepted offer. Should the offer in first position fall through, the back-up offer is automatically moved into first position. A third offer cannot be jumped ahead of the back-up offer, but could be considered for the new back-up position.

Closing
This has different meanings in different states. Generally, a real estate transaction is not considered “closed” until the following steps have happened: final “settlement” documents are signed (usually at the escrow/title company); the closing costs are paid; the loan is funded with the buyers assuming the new loan obligation; the monies are disbursed according to the contract; and the new ownership (title) is recorded at the local recorders office.

Comparative Market Analysis (CMA) 
This is a document done to determine the current market value of a particular home. It involves a comparison of the prices of recently sold homes which are similar to a seller’s home in terms of location, style and amenities. CMAs are often done by real estate agents to help sellers determine the asking price when a home is put on the market. It can also give buyers additional information to consider when making an offer. An appraisal is a similar but more formal and more in-depth document, prepared by a qualified appraiser accepted by the lender, to determine the worth of a property.

Contingency
A condition that must be met by a certain date that is part of the legally binding contract often called a Purchase Agreement. For example, there is usually a contingency period in the first phase of escrow to allow home purchasers to obtain inspections and learn all that they can about the property, to see what the home appraises for, and to make sure that their financing is going to work for them. Once the home buyers are satisfied with what they’ve learned and release all those contingencies, the escrow becomes pending; the buyer risks losing deposit money (or possibly more) if they were to then back out of the contract.

Counter Offer
This is a response to a previously made offer, basically accepting the offer with the exception of certain conditions (e.g. price or timing) which are specified in the counter offer. If the counter offer is then signed by both parties, it becomes part of the agreed upon contract which now includes the new conditions put forth in the counter offer. Once there is a ratified (signed) contract then the buyers open escrow.  The contract becomes the buyers’ and sellers’ joint instructions for the escrow officer. There can be a counter to the counter offer, and a counter to the counter to the counter, and so forth. This is all part of the negotiation process between sellers and buyers…possible multiple buyers.

Escrow
As a noun, escrow is the money, property, deed, or bond put into the custody of a third party (usually a title and escrow company) for delivery to a seller only after fulfillment of the conditions specified and mutually agreed upon signed contract. For example, in a real estate sale, the initial deposit accompanying the purchase offer is placed “in escrow” and not delivered to the seller until all the conditions of the contract are met and the transaction is closed.  

Escrow is also used to describe the process of a sale.  As soon as there is a signed agreement,which includes terms and a timetable, the buyers’ agent “opens escrow” with a title/escrow company. The first part of escrow is the “Contingency” period during which the buyers do their due diligence, have inspections, and makes sure their financing is in order. Once the various contingencies are released (according to the agreed upon timetable) then the escrow enters the “Pending” phase.  This is when both buyers and sellers may sigh with a certain amount of relief since the percentages of the escrow closing after it becomes pending are much higher than during the Contingency phase. Of course, a sale isn’t final until the escrow actually closes.

Fiduciary Relationship
This means that the agent owes his/her client a duty of the utmost care, integrity, honesty and loyalty. By law, in California, if you are involved in a listing, sale, exchange, and some leases the agency relationship must be disclosed. In addition, when an offer is made, the agency relationships must be confirmed in writing by both the buyer and seller.

Loan Consultant
The person that you talk to about your credit rating, what type of loans are available to you, what loan would work best for you, what the mortgage payments would be, and what you’ll need to do to apply for a loan. Your loan consultant will be an important part of your team as you go through the home buying process, from beginning to end. They generally work for companies that are either mortgage brokersmortgage bankers, or both.  These are the actual entities that loan you the money in the form of a mortgage.

Mortgage banker
This is a company that originates its own loans and then resells them to secondary mortgage lenders. They may have special loan packages that would work well for you. However, they only process their own loans.

Mortgage Broker 
This is a company that processes loans for a number of lenders. They don’t originate their own loans like a mortgage banker however they have access to the loan packages of multiple companies. Some lenders are both bankers and brokers, giving you the most variety to choose from.

Multiple Listing Service (MLS)
Usually, your real estate agent will belong to the local MLS and can list your property on that service. This makes it accessible to the most agents, who closely follow when new homes are listed, when they go into escrow, and when they’re sold. There are public sites, such as realtor.com, Californiamoves.com, and greathomes.org, who pay to have access to the MLS and who make part of the information available for the public. Often there is a lag time between a home being listed on the MLS and when some or all of the information and photos show up on the public sites.

Multiple-offer Situation
This is a situation in which more than one prospective buyer makes an offer on the sale of one particular piece of real estate to be considered and reviewed by the sellers. This usually happens in competitive “sellers markets” and buyers often offer more than the asking price.

Offer
A specific amount of money and specific terms put forward, usually in a written contract, for consideration by the sellers of a particular piece of real estate. The sellers then have three choices: they can accept the offer, reject the offer, or counter the offer.

Pending
This means waiting for confirmation or conclusion of the transaction. The second phase of an escrow is called Pending and generally means that the buyer has released all of their contingencies, so the sale of the home can go forward to its conclusion.

Pre-approved
This means that a borrower has completed a loan application and provided debt, income, and savings documentation which an lending underwriter has reviewed and approved. A pre-approval applies only to the borrower. (Sometimes it’s used incorrectly to mean pre-qualified which is a preliminary estimate based on partial information you’ve given the lender.) Once a property is chosen, it must also meet the underwriting guidelines of the lender.

Realtor®A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors. A Realtor® is more likely than a non Realtor® to be active and up to date on the latest legal and marketing issues.


For additional useful information, you can check out Information for Buyers or Information for Sellers on our Coldwell Banker website.

Please feel free to contact me with your questions.