Buying or selling a property is an exciting milestone, but for beginners, the world of real estate can feel like navigating a maze of unfamiliar terms. Words like appraiser, earnest money, or CMA (Comparative Market Analysis) may sound intimidating, but understanding these jargons is crucial to making informed decisions.
At PHINMA Properties, every homebuyer or seller deserves to feel confident throughout their real estate journey. Whether you’re purchasing your first home or preparing to sell, this guide will walk you through essential real estate terms you need to know. From understanding the role of a real estate agent to decoding mortgage processes, we’ve simplified the language of real estate for you.
General Real Estate Terms
Real estate can seem full of complicated titles and terms, but understanding these basics will help you communicate effectively and make informed decisions during any property transaction.
Real Estate Agent
In the Philippines, a real estate agent is a licensed professional who facilitates property transactions, acting as an intermediary between buyers and sellers and landlords and tenants.
Key Responsibilities:
- Market Analysis: Helping sellers set appropriate property prices and suggesting enhancements to increase marketability.
- Negotiation: Mediating between buyers and sellers to ensure fair and smooth transactions.
- Documentation: Assisting with paperwork such as offers, contracts, and legal documents.
- Client Representation: Representing buyers or sellers, offering advice, and guiding them through the process.
While agents represent clients and handle property transactions, real estate brokers have more authority and can operate independently.
Real Estate Broker
A real estate broker in the Philippines is a higher-level professional who oversees transactions and can operate independently or manage a team of real estate agents.
Key Responsibilities:
- Transaction Oversight: Ensuring all legal and procedural steps are followed during sales.
- Negotiation: Securing favorable terms and prices for clients.
- Marketing: Developing strategies to promote properties effectively.
- Supervision: Manage and mentor real estate agents under their brokerage.
Brokers play a crucial role in the real estate market. They offer expertise, oversee teams, and ensure compliance with legal processes.
For Sale By Owner (FSBO)
FSBO refers to a real estate transaction where homeowners sell their property without involving a real estate agent or broker.
Key Aspects:
- Cost Savings: Sellers avoid paying agent commissions (5% to 6%), keeping more profit from the sale.
- Market Control: Sellers manage pricing, marketing, and negotiations directly.
- Legal Responsibilities: Sellers handle paperwork and ensure legal compliance, which can be challenging without professional guidance.
Advantages:
- Increased profits from avoiding agent fees.
- Direct and personal communication with buyers.
Disadvantages:
- Time-consuming process for marketing, property showings, and paperwork.
- FSBO homes often sell for lower prices compared to those sold through agents.
Understanding these basic real estate roles and terms is the first step in making informed decisions when buying or selling a property. Now that you know who’s who in the real estate world, let’s dive into the financial side of things—where mortgages, appraisals, and closing costs come into play.
Mortgage Terms
Understanding mortgage-related terms is essential for anyone planning to finance a property purchase. These terms will help you navigate loan applications, costs, and other financial aspects of real estate transactions.
Appraiser
A real estate appraiser in the Philippines is a licensed professional who determines the market value of a property. Appraisers play a critical role in property sales, mortgage approvals, and tax assessments.
Key Responsibilities:
- Property Valuation: Assessing a property based on factors like location, size, and condition.
- Market Analysis: Comparing similar properties in the area to ensure accurate valuations.
- Report Preparation: Creating detailed appraisal reports that outline findings and valuation methodologies.
Appraisals ensure that buyers, sellers, and lenders have a clear, unbiased understanding of a property’s worth, protecting all parties during real estate transactions.
Closing Costs
Closing costs refer to the additional fees and expenses incurred during a real estate transaction, on top of the property’s purchase price. These costs can impact the total budget for buyers and sellers.
Common Closing Costs:
- Transfer Tax: 0.50% to 0.75% of the selling price, depending on the local government unit.
- Documentary Stamp Tax: 1.5% of the higher value between the selling price and fair market value.
- Registration Fees: Charges for registering the property under the buyer’s name.
- Notarial Fees: Costs for notarizing legal documents involved in the sale.
- Title Insurance (optional): Protects against disputes or defects in the property title.
- Agent Commission: 5% to 10% of the selling price, if an agent is involved.
Closing costs are negotiable but typically shared between buyers and sellers. Buyers must budget for these expenses early in the process to avoid surprises.
Down Payment
A down payment is the portion of the property’s purchase price that a buyer pays upfront in cash. It demonstrates the buyer’s commitment and reduces the loan amount to be financed.
Typical Ranges:
- In the Philippines, down payments usually range from 10% to 30% of the property’s price.
- Higher down payments (e.g., 20% to 50%) are common for premium properties or stricter developer terms.
Purpose:
- Reduces Loan Amount: A larger down payment means smaller monthly mortgage payments and lower interest rates.
- Demonstrates Seriousness: It assures the seller of the buyer’s commitment.
- Market Buffer: Provides security against fluctuations in property value.
Financing Options:
- Personal savings
- Loans from banks or private lenders
- Government housing programs
Mortgage Broker
A mortgage broker acts as an intermediary between borrowers and lenders, simplifying the mortgage application process.
Key Responsibilities:
- Loan Matching: Assessing a borrower’s needs and connecting them with suitable mortgage options.
- Application Assistance: Helping clients prepare documents and ensuring accuracy.
- Negotiation: Securing favorable interest rates and terms from lenders.
- Guidance: Educating clients about loan features and implications to make informed decisions.
Brokers earn commissions (origination fees) from either the borrower or lender, typically a percentage of the loan amount.
Now that you have a clearer understanding of the financial terms behind real estate transactions, you’re one step closer to confidently navigating the costs and processes of buying a home. Next, let’s explore key terms for sellers—whether you’re listing your property or attracting the perfect buyer, knowing these terms can make all the difference.
Home-Selling Terms
Selling a home involves more than just putting up a “For Sale” sign. From choosing the right listing strategy to preparing disclosures, understanding key home-selling terms will help you market your property effectively and close the deal with confidence. Let’s break down the most important terms sellers need to know.
Listing Agent
A listing agent is a real estate professional who represents the seller throughout the home-selling process.
Key Responsibilities:
- Market Analysis: Conducting a Comparative Market Analysis (CMA) to set the right asking price.
- Property Preparation: Advising on repairs, staging, and enhancements to make the home market-ready.
- Marketing: Creating listings, organizing open houses, and using online/offline strategies to attract buyers.
- Negotiation: Handling buyer offers to secure the best price and terms for the seller.
- Documentation: Assisting with legal paperwork to ensure a smooth closing process.
Having a skilled listing agent can streamline the selling process, maximize your property’s value, and reduce stress.
Open House
An open house is a scheduled event where a property for sale is made available for potential buyers to visit without prior appointments.
Purpose:
- Attract Buyers: Draws in a large pool of potential buyers within a short period.
- Showcase the Property: Allows sellers to highlight unique features and create a great first impression.
- Market Visibility: Boosts interest in the home through coordinated marketing efforts.
Typical Features:
- Scheduled during weekends for maximum turnout.
- Promoted through online listings, social media, and advertisements.
- Agents or sellers provide guided tours and answer buyer questions.
Buyers can explore the home informally, while sellers can gather feedback and generate leads.
Comparative Market Analysis (CMA)
A Comparative Market Analysis (CMA) helps estimate a property’s value by comparing it to similar homes that have recently sold or are on the market.
Key Components:
- Comparable Properties: Properties with similar location, size, and features.
- Market Conditions: Supply and demand trends, average days on market, and pricing shifts.
- Recent Sales: Sold prices of comparable homes over the past 3-6 months.
Agents use CMAs to guide pricing strategies, helping sellers position their property effectively in the market..
Seller Disclosures
A seller disclosure is a legal document that lists any known issues or defects with the property, ensuring transparency between sellers and buyers.
Why It’s Important:
- Transparency: Gives buyers a clear understanding of the property’s condition.
- Legal Protection: Protects sellers from post-sale claims if defects were properly disclosed.
- Negotiation: Buyers can use the information to request repairs or adjust the price.
Common Disclosures:
- Past damage (e.g., water leaks or pest infestations).
- Repairs or renovations made.
- Environmental hazards (e.g., mold or lead paint).
By being upfront, sellers build trust, reduce legal risks, and create smoother negotiations.
Selling your home successfully requires more than just listing it—it involves preparation, pricing strategies, and full transparency. With these key terms in your toolkit, you’re now ready to attract buyers, navigate negotiations, and close the deal with confidence.
Other Real Estate Terms
Beyond buying, selling, or financing, there are additional terms in real estate that every property owner or buyer should understand. These concepts often relate to legal rights, fees, and community management—crucial for smooth property ownership and transactions.
Earnest Money
Earnest money is a deposit made by a buyer to show their commitment to purchasing a property. It is paid after the seller accepts the buyer’s offer.
Key Aspects:
- Amount: Typically ranges from 1% to 3% of the property price but can be higher in competitive markets.
- Purpose: Protects the seller if the buyer backs out without valid reasons, compensating for their time and effort.
- Held in Escrow: A neutral third party (e.g., title company) holds the deposit until the sale is finalized.
- Refund Conditions: Buyers may receive a refund if contingencies like failed inspections or financing issues arise.
Earnest money signals a buyer’s seriousness and builds trust between both parties during negotiations.
Easement
An easement is a legal right that allows someone to use part of another person’s property for a specific purpose.
Types of Easements:
- Utility Easements: Grant utility companies access to install and maintain infrastructure like water pipes or power lines.
- Private Easements: Agreements between neighbors for shared driveways or water access.
- Easement by Necessity: Occurs when a property owner needs access to public roads through another’s land.
- Prescriptive Easements: Established when someone uses another’s property openly and continuously for a set period.
Easements do not transfer ownership but can impact how a property is used, so buyers should investigate any existing easements before purchasing.
Homeowners Association (HOA)
A Homeowners Association (HOA) is a private organization that manages and maintains residential communities like subdivisions or condominiums. Membership is typically mandatory for property owners.
Key Functions:
- Rule Enforcement: Ensures community standards are upheld, such as landscaping and noise restrictions.
- Maintenance: Manages common areas like parks, pools, and walkways.
- Financial Management: Collects fees to fund maintenance, improvements, and future projects.
- Community Engagement: Organizes events to foster a sense of community among residents.
However, homeowners should consider HOA fees and restrictions when choosing a property.
House Titles
A house title represents the legal ownership and rights to a property. It is essential for determining who can use, sell, or transfer the property.
Key Aspects:
- Title vs. Deed:
- Title: Intangible rights of ownership.
- Deed: The physical document transferring ownership.
- Title Search: Before purchasing, a title search ensures there are no ownership disputes or liens on the property.
- Title Insurance: Protects buyers and lenders against losses from unforeseen claims on the property title.
Types of Titles:
- Fee Simple: Full ownership without restrictions.
- Leasehold: Ownership for a set period, often tied to leased land.
- Strata Title: Common in condominiums, where owners share rights to common areas.
Clear house titles are crucial for smooth and legally binding property transactions.
Take the Next Step with PHINMA Properties
Understanding real estate jargon is the first step toward making informed decisions, whether you’re buying, selling, or investing in property. At PHINMA Properties, we’re here to guide you every step of the way.
Discover high-quality, affordable homes designed with your needs in mind, backed by expert support to make the real estate process seamless and stress-free.
Explore your options today!
- Contact Us to schedule a property viewing or speak with our real estate specialists.
- Visit our About Us page to learn more about PHINMA Properties’ commitment to building better lives.
