Essential real estate terms Charleston house buyers should know

Do you know how pelicans communicate? 

We don't really talk - we make these loud, guttural squawks, grunts, and clapping sounds from our beaks that somehow make perfect sense to all other pelicans.

GRONK GRONK, we'll say, and every pelican in a 10-mile radius knows exactly what we mean.

Your average real estate agent is basically the same.

Last week we walked you through all of the usual steps in buying a house in Charleston, and we learned that it's not really that difficult. It's basically just an 8-step process.

But we also learned that real estate agents like to talk Real Estate™ and throw terms around like everyone was born knowing what "debt-to-income ratio" means. Sometimes they'll casually drop "Oh, the appraisal contingency" into conversation in basically the same way we pelicans might SQUAWK-SQUAWK-CLAP at each other over a good fishing spot.

So consider this your Pelican-to-Human, Real-Estate-to-English dictionary.

We've organized these terms by when you'll actually encounter them in your house-buying journey (following those 8 steps that we discussed from last week).

If you're ready to decode all these strange Real Estate™ terms, then let's go.

Pre-Approval and Mortgage Terms

Pre-approval

It's a letter from a lender saying "Yeah, we checked this person out and we'll loan them up to $X." It's essential for touring homes - sellers want proof you can actually buy. Different from pre-qualification, which is just an estimate based on data that you submitted (i.e. it's just the lender taking your word for it that you make enough money.)

DTI (Debt-to-Income Ratio)

This is the percentage of your monthly income that goes to debts. Lenders usually want this under 40% or so. So if you make $5,000/month and have $2,000 in monthly debt payments, your DTI is 40%.

LTV (Loan-to-Value Ratio)

The percentage of the home's value you're borrowing. If you're buying a $400,000 house with $80,000 down, you're borrowing $320,000, thus making your LTV 80%. The higher your LTV, the higher your risk is to lenders, which means that they would have to charge you more.

Finding a Lender Terms

Interest Rate vs. APR

Interest rate, as we all know, is basically your "payment" for the money that you borrowed. APR is the Annual Percentage Rate, which includes all the lender fees rolled into it. The APR is the true cost of the loan, and is what you need to compare between lenders.

PMI (Private Mortgage Insurance)

Should your down payment be less than twenty percent, this is the insurance that you need to pay monthly. This protects the lender if ever you default. What this means is that you would have to pay an extra $100 to $300 a month, but it lets you buy sooner with less money down.

Mortgage Points / Discount Points

Mortgage points are a type of prepaid interest that you can pay upfront to lower your interest rate. The usual going rate for these points is 1 point equals 1% of the loan amount. So if you pay $2,000 upfront on a $200,000 loan, you can lower your monthly payment by at least $50.

Rate Lock

A guarantee from your lender that your interest rate won't change for a specific period (usually 30-60 days). Protects you if rates rise while you're under contract.

Working with Real Estate Agents Terms

MLS (Multiple Listing Service)

A private central database where real estate agents list properties for sale. Only licensed real estate agents have full access to these kinds of databases. Your agent can set up instant alerts when new listings match your criteria.

Buyer's Agent vs. Listing Agent

The buyer's agent is your agent i.e. this person represents you in the purchase. The listing agent represents the seller. Dual agency (one agent representing both) sometimes happens and is legal but not ideal. It's basically like having one lawyer for both parties in a divorce.

Escalation Clause

A provision in your offer that automatically increases your bid if competing offers come in. You set a maximum and increment amount. Particularly useful in hot markets with high demand, as it can help you win without overpaying.

House Hunting and Property Terms

Easement

Someone else's legal right (oftentimes the government or utility companies) to use a part of your property. An example would be a utility company accessing power lines on your land, or a neighbor having a right-of-way to access their property through yours.

HOA (Homeowners Association)

When you buy a home in Charleston, there's a high chance that it will be governed by an HOA. This is a private organization that manages and oversees community areas and affairs. They also enforce community regulations on things like parking, landscaping, and paint colors.

Comps (Comparables)

The prices of similar homes in the area, useful for determining market value. Your real estate agent will use these figures to justify offers. For example: "A similar house sold for $380K, but this one needs a new roof, so we'll offer $360K."

Pending vs. Under Contract

Under contract means an offer was accepted but inspections are ongoing. Pending means all contingencies are met and it's heading to closing. Don't get attached to pending houses - they're basically sold.

Making an Offer Terms

Earnest Money Deposit

Payment made to show a seller that you're serious about buying. What you pay here goes toward your down payment at closing, or alternatively you can get it back if the deal falls through for covered reasons.

Contingencies

Contingencies are escape clauses that are written into your purchase agreement. These clauses let you back out of the agreement without losing your deposit if certain conditions aren't met. The big three are:

Financing:

If your loan doesn't get approved or you can't secure any kind of financing whatsoever, you can exit.

Inspection:

Based on inspection findings, you can either negotiate or exit the agreement. If a professional inspector finds major problems (like foundation issues or a bad roof), you have three options- you can either ask the seller to fix them, lower the price, or walk away.

Appraisal:

An appraisal is a report of your home's fair market value. It's an objective valuation of a home's worth on the market. Based on your contract, you can renegotiate if the home appraises below offer price.

Closing Date

The day ownership officially transfers, typically 30-45 days after offer acceptance. Balance giving yourself enough time with not losing to competing offers with quicker closes.

Home Inspection and Due Diligence Terms

Due Diligence

Before purchasing a house, a buyer is given time to inspect the property and review all documents thoroughly. This usually takes around 10-14 days in South Carolina. You can back out during this period, though you might incur a small fee.

Home Inspection

A professional evaluation of the property's condition, covering structure, systems, and major components of the property you're buying. You should expect a 40-50 page report listing everything from minor issues to major problems.

Appraisal Gap

What happens when the home appraises for less than your offer price. You can negotiate the price down, pay the difference in cash, or walk away (if you have an appraisal contingency stated in your contract).

Title Insurance

Insurance protecting against future claims to ownership of your property (e.g. forged signatures, unknown heirs, or errors in public records that could threaten your ownership).

Final Loan Approval Terms

Clear to Close

This is basically your lender telling you that all conditions are satisfactorily met and you are free to schedule closing.

Conditions

Requirements from underwriting that must be met before closing. Could be explaining a large deposit, providing updated pay stubs, or getting additional insurance. Miss these and your closing gets delayed.

Closing Day Terms

Closing Disclosure

Final statement of all loan terms and closing costs, provided three days before closing. Will be a buyer's last chance to catch errors so every line in this document needs to be thoroughly reviewed.

Prorations

Costs like property taxes, HOA fees, and utilities that get divided between buyer and seller based on who owns the house for what portion of the billing period.

Escrow

An account where funds are held by a third party. Holds your earnest money during the purchase, then holds your monthly tax and insurance payments after you own the home.

Recording

Even if you have the keys, you don't technically own the house yet. It needs to get officially filed with the county first before you can be its legal owner.

Charleston-Specific Real Estate Terms

CL-100

There's a lot of humidity in Charleston, and with humidity comes termites, wood infestations, and moisture damage. The CL-100 is a written report done by a licensed professional that checks for these things. This document is required for most sales; if there are damages that are found on the property, the seller would have to take care of those first.

Historic District/BAR

Charleston, as you may know, has a lot of historical character to it. The Board of Architectural Review oversees that this character is maintained. So you can't change windows, paint colors, or modify the exterior of your house without approval.

Professor Pelican is here to make the home-buying process less intimidating and a hell of a lot more fun. We follow the Path of the Pelican: bold, straightforward, and always looking out for what's ahead.

We'll walk you through every step, and help you find that perfect place to build your nest.