Buy a House In Colorado – Understanding Realtor Speak

If there’s anything I DON’T want to do to people, it’s confuse them with lingo only a real estate agent would love. It’s so easy to forget how much of what we say is ‘insider lingo’. So I avoid using it too much, and yet an understanding of some terms will help you as you enter the market, whether for the first time or the tenth.

This is intended to be a ‘living’ document, so I’ll be adding to it when I think of another term that needs explanation. Feel free to make suggestions!

I’ll also be writing posts that will link to these terms, so please check back every now and then.

Bi-level – this refers to a style of house where the front door usually opens onto a landing and a set of stairs going up and another set of stairs going down. Usually, there’s not a basement in addition to the two levels. Around here, this style usually sells for less money per square foot, in my opinion that’s due to the lack of a basement. (See also ranch, tri-level, and two-story.)

Distressed Sale – this refers to short sales, foreclosures, HUD homes.

Earnest Money – this is a sum of money you put forward at the time you make an offer on a property, or soon after the offer is signed by the seller. It is held by a third party, such as the closing company, until closing. At closing, it goes towards whatever amount of money you are bringing for your down payment or closing costs. If the contract is legally terminated for any number of reasons, the earnest money is returned. There is not a set amount for earnest money, but the seller’s agent usually notes in the MLS how much the seller would like it to be. Buyers can certainly offer a lower amount, but that makes your offer seem weaker.

Foreclosure – the owner defaulted on the loan, and the lien holders pursued their legal right, which in the state of Colorado is foreclosure. Usually when the term is used in the context of looking for a house to buy, it’s referring to a house that’s been foreclosed on, and is now owned by a lending institution. So, the institution is the seller. And yes, that does make buying the house more complicated and less fun, but often they’re a good deal. Se also pre-foreclosure.

HUD home – this is a house that has been foreclosed on, and is now owned by the Department of Housing and Urban Development. If you buy a HUD house, it’s a whole different ball game from any other purchase. There’s a different set of rules to follow, and if you’re the type who likes to buck the ‘system’, you really should find out what you’re getting into before you bid on a HUD house.

Interest - this is the money you pay the lender for the privilege of using their money to buy your house. It does not reduce the amount you owe the lender. It is one part of your monthly payment, the largest part at first, and it gets lower every month as the part that goes towards paying off what you owe (the principle) gets larger.

PITI – stands for principal, interest, taxes and insurance. If you’re getting a loan to buy a house, most of the time your monthly payment will include all four of those items. You send the payment to the lender, they pay the taxes and insurance when they come due. But your payment  may also include mortgage insurance, and any HOA fees would be paid on top of all this. So if you discuss monthly payment with someone, be clear about whether the quote you’re getting includes all the payment, or just principal and interest.

Pre-approved/pre-qualified - Sometimes, these terms are used interchangeably, some people say they’re two different things. Suffice it to say, if you’re planning to buy a house you should apply for a loan, so you know how much your payments would be, and what price range you should stick to. A loan officer (LO) will gather basic information, and tell you how much you should qualify to borrow. At that point, the lender would be able to give you a letter stating the amount, which you need to have when you write an offer.  If you decide to go ahead with getting the loan, the LO  will continue the approval process, and that might mean they’ll ask you for more information, explanations, and maybe even give you some tasks that will improve your credit score. You will not receive final approval until after you have a house under contract, in fact it will be pretty close to closing. Here’s a post where you can read more.

Pre-foreclosure – this term is used for a property when the owner has defaulted on the loan and the lender has filed notice of intent to foreclose. If you want to buy a house in this situation, you should go to the county website and look up the foreclosure sale date, so you don’t get caught by surprise. If you’re interested in a pre-foreclosure to use as an investment property, not as your own personal residence, there are additional complications, too much to go into here. Just be aware you need to work with an agent who understands them, so you don’t get into trouble.

Principle – this is the part of your monthly payment that goes towards reducing the amount you owe on your home (the balance). When a loan is new, this is the smallest part of your payment and the interest is the largest part. As time goes by, a larger portion of the payment goes towards the balance (principle), and less is interest.

Radon - this is an odorless, colorless gas that comes from the natural breaking down of granite over time. It is said to be the second leading cause of lung cancer. You can’t tell if a house has it without a spefic test being done. It doesn’t matter if a nearby house had it or not, each idividual home must be tested to know how much radon is present. See my post, ‘What About Radon?’, here.

Ranch - this refers to a one-level house (I’ll never forget the time I realized an out-of-town buyer thought I was trying to sell him an actual working ranch!).  It may or may not have a basement or garage and can come in any size and with any number of rooms. Around here, these sell for the most dollars per square foot, because there aren’t as many of them as other styles, so they bring a better price from people who want one-level living. (See also bi-level, tri-level, and two-story)

Short Sale – the word ‘short’ does not refer to the amount of time the sale will take, but to dollars. The seller owes more than the house will sell for. An attempt is made to get whichever institution holds the mortgage(s) to agree to release their lien(s) without receiving full payoff, AND to pay costs of the sale, such as title insurance and real estate agents fees, AND to pay off other liens such as taxes, water, andHOA. It’s not easy, and can take months, and there’s no guarantee of success. But short sales are usually the best deals.

Tri-level – this refers to a style of house that has three levels, where the middle level is half a story between the other two. The three levels are not stacked on top of each other, there is a short flight of steps between each level. This style was popular in the 1970s, then fell out of favor for awhile, but is seeing renewed popularity. Some people really like them, because they have a more open feel than most 2-stories and they don’t have that long staircase. They’re not as ‘formal’ as a 2-story, but are more formal than a bi-level. Usually the front door opens onto the level that has the front room, dining room and kitchen. You go upstairs to the bedrooms and bathroom, and down stairs to a family room, another bathroom, possibly the laundry room. There’s many variations in these floor plans, some have basements and may be referred to as a 4-level.

Two-story - refers to a house that usually has the front room, kitchen, dining room, maybe a family room, office, or a bedroom on one floor and a second floor above with the bedrooms, sometimes a loft, etc. They may or may not have a basement. Two-stories are popular and fetch a higher price per square foot than some models because if there is a basement, it’s usually pretty large.

This is the last post in a series for people wanting to buy a house in Colorado. I’ve already covered Getting the Loan, Finding the House, Offer/Counter Offer, Inspection and Negotiation, appraisal, closing, moving, and the special fun of distressed sales (short sales and foreclosures). Read the first post, and find links to the rest of the series here.

I write posts on real estate issues and local events in the Denver metro area, especially those *communities between Denver and Boulder, as a public service. My hope is to give people an idea of the ‘flavor’ of our community, in case they’re new or moving to the Denver area.

I am a residential real estate agent, happily helping folks buy a house or sell a house in the beautiful and friendly *suburbs northwest of Denver.

*Arvada, Broomfield, Westminster, Thornton, Golden, Wheat Ridge, Northglen, Lakewood
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