Easily Confused Real Estate Terms

Appraisal versus InspectionThere are a lot of Real Estate Terms used during a transaction.  And in the process buyers, sellers, and even agents sometimes get these terms confused. Here are some of the common real estate terms that cause confusion.


The Deposit, also known at a “Good Faith Deposit” is money the Buyer delivers to the Escrow company shortly after Seller accepts their offer. It is usually 3% of the purchase price. This money shows the buyer truly wants to buy the property. It gives the seller assurance, or faith, that the buyer will close the transaction. This money is part of the down payment.

The down payment is the percentage of the purchase price the Buyer will be paying with cash. For example, if the purchase price is $500,000 and the lender is requiring a 20% down payment, the Buyer will have to bring $100,000 in cash to escrow to close the transaction. The Buyer would bring a deposit of $15,000 (3% of $500,000) at the opening of escrow and $85,000 right before the close of escrow. So the deposit is really a portion of the down payment, but paid early.


An Appraisal Inspection is an assessment of the house’s value. This inspection is usually required by the Buyer’s lender to confirm the property is as valuable as the amount offered. The appraisal inspection is ordered by the lender, paid for by the buyer and usually attended by a licensed Appraiser and the Listing Agent. What happens if the appraisal value is less than the offered amount? There are many scenarios but ultimately it becomes a re-negotiation between Seller and Buyer as to the purchase price.

A Physical Inspection is an assessment of the home’s physical condition. This inspection is very important and should never be waived.  It is recommended the Buyer hire a licensed inspector. The physical inspector will look at every part of the house. Often they may recommend further inspections for systems such as roof, plumbing and electrical. The Buyer and Buyer’s Realtor should always be there for this inspection. Usually the Seller is does not attend the physical inspection.


Funding is when the lender ‘funds the loan’ and sends the money to the escrow company to finance the home purchase. Once the escrow company has the full down payment from the Buyer and the funds from the lender the transaction can be closed.

The Closing occurs once the Grant Deed is stamped and recorded at the county courthouse. Once the transaction is closed the Seller is no longer the owner and they receive their money payout from the escrow company. Happily, the Buyer gets the keys!

If you have questions in any other real estate terms you may call Michele K 562-243-2171.

Please visit my YouTube account https://www.youtube.com/channel/UCgPX7k7u2d0lKWaTaO6qPwg to know more about Real Estate or other Real Estate Terms.

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