Knowledge is Power! A quick guide to real estate terminology.

There's no denying that buying or selling a home can be overwhelming. Between the logistics and then throwing in terms like "due diligence" and "earnest", it's easy to understand why you might feel confused.  Let's not make things more complicated, so here are some real estate terminologies broken down in an uncomplicated way.

As defined from the NC Real Estate Manual:

Due Diligence -"A term used to describe the process of a buyer investigating a property being purchased in a diligent manner, usually within a period of time (the "due diligence period") prescribed in a sales contract, to determine if the buyer is satisfied with the property and wishes to proceed with the purchase"  This is the period that inspections, appraisal, and repair negotiations are made.  A buyer gives a "due diligence fee" check to the seller, which the seller keeps if the contract falls through or the buyer backs out during the due diligence period.  If the buyer closes on the home, the due diligence fee is credited at closing.

Earnest Money - "A sum paid by a prospective purchaser of real estate as evidence of good faith, usually paid to the broker at the time an offer is made" This is a check a buyer pays that is held by the closing attorney.  If a buyer cancels a contract during the due diligence period, the earnest money is returned but the due diligence fee is kept by the seller.  If a buyer cancels a contract after the due diligence period, the due diligence and earnest money fees are forfeited to the seller. If a buyer closes on the home, the earnest money is credit at closing.

Contingency - "A provision in an offer or contract that makes performance and consummation of the offer or contract dependent or contingent upon the occurrence of some act".

Comparative Market Analysis (CMA) - "An estimate prepared by a licensed real estate broker that details the probable selling price or leasing price of a particular parcel of or interest in property"

Appraisal - "An estimate or opinion of quantity, quality, or value.  As applied to real property, it is an opinion as to a property's value, marketability, usefulness, or suitability.  Also, the process of deriving a conclusion as to value, and the report setting forth this conclusion".  This is ordered by the lender and required when obtaining a loan for your purchase.  

Comps - "Comparable - a term used to describe a recently sold property that has similar characteristics to a property that is the subject of a CMA or appraisal being appraised (the "subject" property) and that is used for comparative purposes when estimating the probable selling price or value of the subject property."