Teacher's Lounge to Living Room: Real Estate Essentials Explained (Lesson 1)

(Picture on the left: My daughter and I in 2018 on "Dress Like a Teacher Day;" Picture on the Right: Recent Open House in March 2024 for a RISE Homes Listing in the East Bay)

Welcome to Class 📚

Part of my goal as a former teacher and principal, and now a realtor, is to provide a platform for others to learn the complexities of real estate and basic finance in an approachable and digestible way. Often realtors nonchalantly throw out specific words, and people just nod their heads up and down as if they understand what this professional is talking about. It is embarrassing to ask for clarification in these moments. Before we begin, I wanted to start this series with a transparent telling of my story as it relates to feeling like a dunce in the real estate world. 

Navigating the intricate world of real estate and finance can often feel like deciphering a foreign language, especially for those of us who didn't major in economics or finance. I vividly recall my high school economics class, chosen mainly to fulfill graduation requirements and perhaps enjoy a bit of co-ed interaction being one of the few classes offered at my all girls high school that invited boys to attend. Despite being taught by my favorite teacher and having given my best efforts, the complexities of graphs and variables seemed to elude me. My required college Economics 101 class wasn't much better. The only information I recall from that semester was that the teacher had to grade on a curve and I, thankfully, received a C. Fast forward to today, and the once-intimidating world of finance has become increasingly relevant. As someone who once felt utterly lost in discussions of stocks and business, I've come to realize that understanding these concepts is not only achievable but essential. 

If you've ever found yourself zoning out during discussions of escrow, closing costs, or mortgages, rest assured, you're not alone. As a former teacher turned realtor, I'm passionate about breaking down these concepts in a way that's approachable and easy to digest. So, let's start with the basics. In this series of blog posts, I'll be unraveling the mysteries of real estate jargon, beginning with fundamental terms crucial to any property transaction. Even if you've bought or sold real estate before, don't be afraid to ask questions. Be brave. You can learn this. I promise you are not alone. You are not stupid. No matter what age, the mistakes you have made financially (raising my hand), the intimidation you feel when you hear people talking about the stocks they own- you got this. Let’s jump in.

Lesson 1: Essential Real Estate Terminology 📓

As I continue this educational series on our blog, we will go further down the rabbit hole, but for now let’s start with the basics.I always like to frontload students with vocabulary, so when the time comes to use it in action we have a basic understanding of the words. Here are the most essential terms used during a real estate transaction. 

Real Estate Vocabulary:

1. Escrow: A process where a neutral third party holds funds and documents during a real estate transaction until all parties fulfill their obligations.
2. Closing Costs: Fees associated with the purchase or sale of a property, including lender fees, title insurance, appraisal fees, and more.
3. Title: Legal ownership of a property.
4. Contingency: A condition that must be met for a real estate contract to be binding, such as obtaining financing or completing inspections.
5. Non-Contingent: Making an offer that does not depend on another circumstance. This basically tells the home seller, “I am going to buy this property, regardless of what happens.”
6. Appraisal: An assessment of the value of a property conducted by a licensed appraiser.
7. Earnest Money: A deposit made by the buyer to demonstrate their commitment to the purchase, typically held in escrow until closing.
8. Deed: A legal document that transfers ownership of a property from one party to another.
9. HOA (Homeowners Association): A governing body responsible for managing and maintaining common areas in a community or development, often requiring membership fees.
10. Mortgage: A loan used to purchase real estate, secured by the property itself.
11. Amortization: The process of paying off a loan over time through regular payments, which include both principal and interest.

             11a. Principal: The amount you borrow, and goes down as you begin to pay it back.

             11b: Interest: The cost of borrowing the money, generally expressed as a percentage. 

   12. Assessment: The process of determining the value of a property for tax purposes.

   13. Contingent Offer: An offer to purchase a property that is dependent on certain conditions being met, such as the sale of the buyer's current home 

   14. Title Insurance: Insurance that protects against losses due to defects in the title of a        property.

   15. Adjustable-Rate Mortgage (ARM): A mortgage with an interest rate that can change          periodically, typically after an initial fixed-rate period.

   16. PMI (Private Mortgage Insurance): Insurance required by lenders for borrowers who make a down payment of less than 20% to protect against default.

    17. Lien: A legal claim against a property as security for a debt or obligation.

    18. Broker: A licensed real estate professional who acts as an intermediary between buyers  and sellers in real estate transactions.

    19. Market Value: The actual value of your property when placed at sale on the open market It's determined by buyers and defined as the amount they are willing to pay for                              purchasing the home.

    20. Appraisal: A third-party opinion of how much the home is worth based on the fair market value.

Next class, we will walk through the very first steps in home buying! (Hint: Although fun, it is not going to open houses).