Friday, May 23, 2008

Glossary of Real Estate Terms

When doing research, analysis, and reporting of our local real estate market conditions, I tend to use the same terms and phrases over and over again. I'm pretty sure that I've defined each of these terms at one point or another along the way, but that may have been many posts ago, and it's very possible some people are either newer readers (thank you for finding me) or didn't see that particular post. Either way, I receive questions from readers asking about some of these terms, so I thought I'd take a minute to define them here. Hopefully this will make it easier for everybody to be on the same page.

Here is a list of terms I frequently use and their definition (at least according to me!)

Active / Actives / Active Homes - Our local MLS uses the term Active to mean "Actively for sale". These are the homes currently listed for sale in the MLS, waiting for a buyer to come along and scoop them up.

Sold - Those homes which have closed escrow, as indicated by our MLS system. Occasionally I'll include homes which sold outside of the MLS system as well, but when I do that I will indicate it as such.

Pending - These are homes in the MLS system which have received an offer, and which are no longer marketing for backup offers. Homes in Pending status are very likely to become Sold in the near future, although they can (and do) fall out of escrow from time to time.

Active With Contingencies - Very similar to the Pending category, except these sellers are still marketing to find a backup offer. Maybe the current buyer still needs to sell a house before the contract can close escrow, or maybe the seller isn't completely confident in the buyer's ability or desire to perform. Some people consider these more like Active, because the seller is still marketing the property. Others consider these more like Pending, because the seller has accepted an offer. Either way, I'll make note of what I'm doing with these homes if/when I include them in my analysis.

List Price - The price a seller is asking for his/her home. This has no bearing on whether a particular price is high or low, it's simply what the seller hopes to receive.

Sales Volume (also called Sales Pace or Sales Rate) - A measure of how fast homes are selling. Usually reported as how many homes Sold within the last 30 days, but it may also measure a different time period. I typically make note of the time frame if it's different from 30 days.

Inventory - In much the same way that Best Buy has an inventory of computers in stock, our market has an inventory of homes available to purchase. We typically report inventory in one of two different ways:

Number of Homes - A measure of how many homes are currently listed for sale (Active) in the MLS. This can be further broken out by Single Family Detached, Condos, etc., or it can be broken out by city, zip code, or any other region.

Months' (Days') Inventory - A measure of how many months (days) it would take, at the current Sales Volume, before there wouldn't be any Inventory left. Or, how long would it take to clear the inventory from the market?

$ / sqft - Generally referred to as the price paid per square foot. This can be used for both Active and Sold homes. (although for Active homes it would be the asking price per sqft.)

Sold % List - This is a comparison of the Sold price as a percentage of the List price.

Days on Market - The number of days a home has been on the market, either as Active or Active With Contingencies, in the MLS. This is not always a hard and fast number, however, and can be manipulated by taking the home off the market for a period of time, or by switching agents. I tend to look at this number on a macro level as a means of spotting trends, rather than focusing on the number for any particular Active listing.

I hope this makes my future posts easier to understand, and I apologize to any of my regular readers who may have suffered a concussion when they fell asleep from boredom and bonked their head on their desk!

Your feelin' like Webster Realtor,

Chris Butterworth

[tags] real estate terms, glossary [/tags]