# Essential Real Estate Terms Every Buyer and Seller Must Know in 2025 Attorney Jim Vanderpool recalls buying his first house. "I walked into this attorney's office—mahogany walls, leather books everywhere, the whole 'I am a Big Important Lawyer' setup. With cigarette in hand, he slides this mountain of papers at me and starts rapid-fire: 'sign here, here, here.' I stopped him. 'Sir, this is my first house. Could you explain what I'm signing?' He peers over his glasses: **'Son, it don't make a damn bit of difference if you understand or not. If you don't sign these docs, you aren't moving into that house.'** He was 100% right—you do have to sign. But you don't have to be clueless about it. That moment shaped everything about how I practice law." That experience taught me what would become the greatest lesson of my 25-year career: **knowledge eliminates fear**. When you understand terms like "earnest money" and "closing disclosure," the entire process becomes far less intimidating. I've watched thousands of clients go from confused to confident simply by understanding the language of real estate. ## The terms that matter most in today's market ### Financial Terms You'll Encounter **Appraisal** – A report highlighting the estimated value of the property completed by a qualified third party. This is typically done for the benefit of the buyer, and their lender, to ensure the property is worth what they are paying. "In today's market, appraisals have become even more critical," Vanderpool notes. "With rapidly changing values, that appraisal protects both buyers from overpaying and lenders from over-lending." **Principal** – The underlying amount of the loan which you actually borrowed, separate from any accrued interest charges. Understanding principal is crucial because it's what you're actually paying down with each mortgage payment. Interest is the cost of borrowing; principal is the actual debt. **Earnest Money** – The deposit made from the buyer to the seller when submitting an offer. This deposit is typically held in trust by a third party and is intended to show the seller you are serious about purchasing their home. Upon closing, the money will generally be applied to your down payment or closing costs. "I always tell buyers to think of earnest money as putting skin in the game," Vanderpool explains. "It shows you're serious, but it's also why we have contracts—to protect that deposit if things go sideways." ### The Costs Beyond the Purchase Price **Closing Costs** – Buyers and sellers both have expenses associated with home sales other than the actual cost of the home. For example, the buyer has a variety of fees connected to obtaining a new loan and the seller has commissions paid to real estate agents. These aren't surprises if you understand them upfront. Buyers typically pay 2-5% of the purchase price in closing costs, while sellers often pay 6-10% when including real estate commissions. **Association Fee / HOA Fee** – In addition to your mortgage, certain housing communities such as condos and townhomes have a monthly fee associated with maintaining the common areas and amenities such as pools. "HOA fees are often overlooked in affordability calculations," warns Vanderpool. "That $300 monthly fee affects your buying power just like a car payment would." ### Critical Legal Documents **Title** – A legal document proving current and proper ownership of the property. Also referred to as a Warranty Deed, this document highlights the history of property ownership and transfers. This is where Vanderpool Law's expertise becomes crucial. "Title isn't just a piece of paper—it's your proof of ownership and your protection against past claims. That's why title insurance exists, and why we spend so much time ensuring clean title transfers." **Closing Disclosure / CD / ALTA Settlement Statement** – A standardized disclosure form that is used to itemize all of the costs and fees as well as the distribution of all of the funds to and from buyer and seller. "The Closing Disclosure is your financial roadmap," Vanderpool emphasizes. "Review it carefully. By law, you must receive it three days before closing, giving you time to spot any discrepancies." ### The Process Terms **Mortgage Underwriting** – The process in which the potential home buyer is evaluated for their financial ability to obtain and repay a loan, normally consisting of a credit check and appraisal of the property. This protects the lender by ensuring the borrower can repay the loan. "Mortgage underwriting is all about you—your credit, your income, your debts," Vanderpool explains. "The lender wants to know you can make those payments for the next 30 years." **Title Underwriting** – The process when historic documents are reviewed to determine if a title insurance policy can be issued and which conditions and exceptions will be included in that policy. This protects both the buyer and lender from past claims on the property. "Title underwriting is about the property's history," Vanderpool notes. "We're looking for liens, easements, or ownership disputes that could affect your rights. It's detective work that protects your investment." These two types of underwriting happen simultaneously in your transaction but serve completely different purposes—one protects the lender's money, the other protects your ownership rights. **Loan Approval** – (does not mean "Loan Approved") A conditional approval or a loan approval letter means that the buyer has been approved for a loan once certain conditions are met. These conditions may be that they sell their current home, provide more documentation, pay off an account, or settle an outstanding balance. "This is perhaps the most misunderstood term in real estate," Vanderpool states. "Conditional approval is not final approval. I've seen deals fall apart because buyers thought 'approved with conditions' meant they were done. Keep satisfying those conditions until you have clear to close." **Counteroffer** – The response from the sellers in regard to the buyer's offer. In Middle Tennessee's competitive market, counteroffers are the norm, not the exception. They're not rejections—they're negotiations. ## Terms that have evolved in 2025 The real estate landscape has changed dramatically, and new terms have entered the lexicon: **Wire Fraud Protection** – Security measures and insurance to protect against fraudulent wire transfers during closing. With wire fraud affecting 1 in 20 transactions, this has become essential. **Remote Online Notarization (RON)** – The ability to have documents notarized via secure video connection, now legal in Tennessee and most states. **Hybrid Closing** – A closing where some parties attend in person while others participate remotely, or where borrowers sign some documents electronically and others in person (usually a short stack). This became increasingly common post-2020 and offers flexibility while maintaining security for critical documents. **Escalation Clause** – A provision that automatically increases your offer price to beat competing offers up to a maximum amount. Critical in multiple offer situations. ## Red flags hidden in terminology Some terms should trigger extra caution: **"As-Is" Condition** – While common, this means the seller won't make repairs. Budget accordingly. **"Quick Closing Preferred"** – Can be legitimate but is also a red flag for fraud, especially with vacant land. **"Cash Only"** – May indicate property condition issues that would prevent conventional financing. **"Subject to Existing Financing"** – Complex transaction requiring legal review. ## Your protection through understanding "The biggest mistake I see is people being too embarrassed to ask what something means," Vanderpool observes. "This is what we do at Vanderpool Law—we won't bore you, but understanding what you are signing is important." At Vanderpool Law, we believe in education first. We provide: - Plain English explanations of all documents - Detailed closing statements in advance - Attorney review at no additional charge for many transactions - Patient answers to every question "Closings don't have to be long," Vanderpool notes. "I typically close clients in under 30 minutes because they've already reviewed everything and understand what they're signing. When you educate clients beforehand, the actual closing becomes a smooth, efficient process—not a confusing marathon." ## Terms specific to Tennessee Some terms have specific meaning in Tennessee: **Deed of Trust** – Tennessee uses deeds of trust rather than mortgages, though they function similarly. **Property Disclosure** – Tennessee's specific requirements for what sellers must disclose differ from other states. **Mechanics Lien Waiver** – Particularly important in new construction, protecting against unpaid contractor claims. ## The bottom line: Knowledge is power Understanding real estate terminology isn't about impressing anyone—it's about protecting yourself. Every term represents rights, obligations, or money. When you understand them, you make informed decisions. "After 25 years, I still learn something new regularly," Vanderpool admits. "But the fundamentals remain constant: understand what you're signing, ask questions when confused, and work with professionals who prioritize education over speed." Remember: In real estate, there are no stupid questions, only expensive misunderstandings. For clear explanations and experienced guidance through your real estate transaction, contact Vanderpool Law at (615) 771-9800. We've spent over 25 years translating complex real estate terms into plain English—and protecting clients who understand what they're signing.