Jargon in real estate always means something, but is it all necessary?

Acceleration clause. Addendum. Amortization. Assignment. Oh yes, we’re talkin’ real estate jargon – and we haven’t even gotten through the A’s yet!

Real estate is one of those industries that can lay on the jargon pretty thick sometimes, and often, it just adds to a client’s confusion. Can we stop using some of these in client meetings? If you must, please make sure your client’s clear on what they mean, especially the following:

1. Amortization – We just had to start with this one. When a loan is “amortized,” the principal is paid off, so amortization is the paying off of the principal; a simple concept, but shrouded by exotic financial lingo.
2. Cloud on Title – Sounds like the title to a progressive rock album, doesn’t it? Clouds are irregularities that may cause someone to change their mind on whether or not they take over a contract; for instance, liens on a mortgage are one of the most common clouds.
3. 442 – This is simply the final inspection on a new home before the closing, but it sounds like antiviral medication with that name; why not just tell clients there will be a final inspection on the home?
4. Encumbrance – This one has an almost English ring to it, no? An encumbrance can be a mortgage, lease, easement or restrictions – it’s anything that affects or limits the fee simple title to a property. Why not keep things simple, and describe those aforementioned items as things that can affect the client’s fee simple title?
5. Addendum – These are additional contracts that go into a real estate contract. So as with “442” and “amortization,” an elegant word seems to have bred with a simple concept.

Are there any terms, though, that we missed? Do you avoid any jargon for clarity’s sake? Or is it more client’s misunderstanding of jargon that is the problem?

Often, the problem is not so much a convoluted term as it is a term so commonplace that it’s prone for misinterpretation. Emilio Palomo, an agent with Riteway Properties and the Miami chair of the Master Brokers Forum, said the most prevalent misconception by far among clients is the difference between short sales and REO properties.

“It’s one of the things we have to go over again and again,” Palomo said, adding that certain details – such as the fact that a short sale is still owned by the original owner, that the bank must approve the final sale price, that there are extensive negotiations involved – are often lost on buyers, who “do not understand the short sale process.”