According to a Consumer Affairs report, almost half of potential homebuyers feel they don’t have sufficient knowledge about the home buying process. The report found that 42% said they don’t know enough, and 30% of current homeowners wish they had known more. In particular, 54% of homeowners wished they knew more about financing and loan options.
“The real estate process can seem complicated and full of jargon that confuses or overwhelms a homebuyer,” says Abby Hauke, past chair of the Greater Milwaukee Association of REALTORS® (GMAR). “REALTORS® help buyers understand real estate terms upfront, so they build confidence, avoid surprises and experience smoother, more informed decision-making throughout the transaction.”
Financing Terms Top the List
According to Kristy Robbins, a REALTOR® with Coldwell Banker, understanding financing terms at the beginning of the homebuying process helps buyers gain clarity on their financial position and what’s realistically within reach.
“One of the first distinctions to understand is the difference between being pre-approved and being fully certified, which means the loan has already been underwritten with all documentation verified,” Robbins says. “A fully certified approval can give a buyer a significant edge, making their offer stronger and more appealing to sellers.”
Earnest money – what it is, when it’s due, and how it’s applied – follows in importance.
“Many buyers think it’s an added cost, when in fact, it’s part of their down payment and is deposited almost immediately after an accepted offer,” says Robbins.
Earnest money is put down by the buyer to show good faith and a commitment to purchasing the property and is typically held in escrow. It is applied to the purchase price at closing or returned if the deal falls through under certain conditions.
Contingencies
Terms related to contingencies such as financing, appraisal, inspection, radon testing and condominium document review, represent additional real estate concepts. Robbins notes that contingencies are protections built into the offer, and each has its own purpose and nuances. She takes time to walk buyers through how contingencies work and how they can help balance risk while still ensuring a competitive offer.
Robbins also likes to review the terms outlined in Addendum AC (Additional Contingencies), especially the Appraisal Gap and Acceleration Clause, which are commonly used in competitive markets.
“An appraisal gap clause is when a buyer agrees to cover all or part of the difference between the appraised value and the accepted offer price,” says Robbins. “This can be a major strength when a seller is looking for reassurance that the offer will still hold even if the appraisal comes in low.”
The acceleration clause allows a buyer to offer an initial price but automatically increase their offer – up to a set maximum – if a competing offer comes in higher. Both strategies can help buyers stand out, but they need to understand them clearly before using them.
Beware of Commonly Misunderstood Terms
- Fixtures vs. Personal Property
What stays and what goes, also known as fixtures vs. personal property, often creates confusion. Under Wisconsin law, anything physically attached to the home (like light fixtures, mounted shelves or curtain rods) is typically considered a fixture and included in the sale. Clearly listing specific items like appliances, wall-mounted TVs or window treatments in the offer helps avoid surprises at the final walkthrough. - Inspection Allowance
Many buyers misunderstand how this works. An inspection allowance means the buyer agrees to cover up to a certain dollar amount of repairs or defects found during the inspection, without asking the seller to fix them. For example, if the offer includes a $1,500 inspection allowance, the buyer is essentially accepting responsibility for the first $1,500 of any needed repairs. It’s important for buyers to understand that this is not a credit or discount from the seller. It’s a built-in tolerance for issues, and anything above that threshold can then be negotiated.
Tools that Promote Understanding
Several resources can give buyers a leg up in understanding real estate terminology.
Experienced REALTORS offer a dedicated buyer consultation that walks the buyer through the entire homebuying process. Robbins uses the “Anatomy of an Offer,” a document that that breaks down each section of the Offer to Purchase and explains what the terminology means in real, practical terms.
Other documents that could come up in the transaction such as Addendum A (which outlines additional terms and disclosures) and Addendum AC (which includes important competitive tools like appraisal gap coverage and acceleration clauses), are also reviewed.
Additional terminology tools include:
- A personalized Home Buyer Guide that outlines key terms, timelines and steps in an approachable way
- Glossaries from the Wisconsin REALTORS® Association
- Infographics and visual handouts help simplify more complex concepts
No Question is Too Small
Robbins uses an educational, hands-on approach to help buyers feel confident and at ease with both the terminology and the overall process.
“I use plain language, visual aids and real-world examples to explain key terms and concepts,” Robbins says. “Some buyers want all the details while others just want the big picture. It’s important for REALTORS to match their approach to meet buyers where they’re at.”
Real estate can be complex, but getting familiar with the language early on changes a potentially overwhelming process into a rewarding homebuying experience.
The REALTOR® Advantage
A REALTOR® is a member of the National Association of REALTORS®, is committed to a Code of Ethics and has the expertise to find the right home for everyone. Look for the “R” to determine if your agent is a REALTOR®.
Locally, the Greater Milwaukee Association of REALTORS® is a 5,500-member strong professional organization dedicated to providing information, services and products to help REALTOR® help their clients buy and sell real estate. Visit gmar.com for more information.