December 8, 2022

Housing market first-timer? From contingency to foreclosure, these are the terms to know.

2 min read

The U.S. housing market has gone from scorching to cooling within months as the momentum is also slowly shifting from a seller’s market to one more favorable to buyers. But some might be unfamiliar with the most commonly used terms in the industry. “The more you know before you jump into either buying or selling a house, the easier it will be,” said Kristina O’Donnell , a longtime realtor in the Philadelphia area.

A housing bubble is a market condition in which prices rise beyond what most believe is reasonable or sustainable, according to Bankrate.com . A housing bubble, or a “real estate bubble” happens when housing prices spike rapidly, usually driven by an increase in demand, limited supply and some emotional buying, Bankrate said. “While even two months ago rates above 7% may have seemed unthinkable, at the current pace, we can expect rates to surpass that level in the next three months,” George Ratiu , manager of economic research for Realtor.com, recently wrote.

A contingency is a clause in a purchase agreement that a specific action or requirement must be met for the contract to become legally binding, according to Bankrate.com . Both the buyer and seller must agree to the terms of each contingency and sign the contract before it becomes binding, the site said. In other words, an offer has been made and accepted on a home, but before the sale is a done deal, some conditions, or contingencies, still need to be met, O’Donnell said. “It gives the parties an opt-out or a way to back out of the deal,” O’Donnell said. Some common contingencies include mortgage contingency, appraisal contingency, and inspection contingency.