Real Estate Terms Every Seller Should Know
5 min read · Last updated 2026-08-03 · Reviewed by Camilo Palacio, Licensed Florida Real Estate Professional (License #3280644, REALTOR®)
A seller who doesn't know these fourteen terms before signing is negotiating blind. So what happens to your earnest money if the deal falls apart before closing? This guide answers that question and thirteen more, the real estate terms that actually move a seller's money, contract, and title, defined in plain language instead of agent shorthand. Cash Flow Deals uses a novation, one of the fourteen terms below, to lock a seller's net price before repairs are scoped.
| Term | Plain-English Meaning | Why It Matters When You Sell |
|---|---|---|
| Earnest Money | A deposit, usually 1% to 3% of the purchase price, showing the buyer is serious, held in escrow until closing. | Whether you keep it if a deal falls through depends on which contingency, if any, protected the buyer. |
| Appraisal Gap | The difference between what the lender's appraiser says the house is worth and the contract price. | The buyer usually covers it, unless you agree to lower the price or split the difference. |
| Contingency | A condition in the contract, like inspection or financing, that has to be met before the sale can close. | Each one is a door the buyer can walk through to renegotiate or exit the deal. |
| Closing Disclosure | A five-page form the buyer's lender sends at least three business days before closing, itemizing every cost. | It's your last real look at the numbers before the sale becomes final. |
| Clear Title | No outside party has a competing legal claim on the property. | A title company will not close, and your buyer's lender will not fund, without it. |
| Lien | A creditor's legal claim against your property, usually from unpaid taxes, a contractor bill, or a judgment. | It has to be paid off or resolved before the title can transfer clean. |
| CMA (Comparative Market Analysis) | An agent's written estimate of your home's value, based on recent comparable sales nearby. | It's usually what sets your asking price, and it's not the same as a formal appraisal. |
| Novation | A three-party swap that releases one party from a contract completely and puts a new party in, with everyone's consent. | Cash Flow Deals uses one so your title transfers once, directly from you to the buyer. |
The Money Terms: What Moves Before You Get Paid
The win here isn't excitement. It's not losing money to a word you didn't look up before you signed something. Start with earnest money: a deposit, usually 1% to 3% of the purchase price, that a buyer puts down to show they're serious about the deal. It sits in a neutral escrow account, held by a title company, closing attorney, or licensed escrow agent, not by either party directly, until closing. If the deal falls through for a reason the contract protects, like an inspection contingency, you may have to return it. If it falls through for a reason the contract doesn't cover, you may get to keep it. Next is the appraisal gap: the difference between what a lender's appraiser says your house is worth and the price the buyer already agreed to pay. The buyer's lender won't finance more than the appraised value, so if the gap is real, the buyer is the one usually on the hook to cover it in cash, unless you agreed to drop your price to match or split the difference. Before any of that, most listing agents run a comparative market analysis, a CMA: a written estimate of your home's value built from recently sold comparable homes nearby, adjusted for size, condition, and upgrades. It's not the same as a formal appraisal, which only a licensed appraiser can produce, but it's usually what sets your asking price in the first place. At the finish line sits the closing disclosure, a five-page form the Consumer Financial Protection Bureau requires the buyer's lender to send at least three business days before closing, spelling out the loan terms and every closing cost down to the dollar. Your own net proceeds, what actually lands in your account, is the sale price minus the mortgage payoff, any liens, closing costs, and commissions still owed. Every term above touches that number directly.
The Contract Terms: What Keeps a Deal Alive or Kills It
You'll see two listing statuses that get used loosely: under contract and pending. In common usage, under contract means the seller accepted an offer but the contingencies, inspection, appraisal, financing, are still open, and the deal can still collapse. Pending usually means those contingencies cleared and the sale is heading to the closing table with fewer ways left to fall apart, though exact usage can vary by local MLS. A contingency itself is a condition written into the purchase agreement that has to be met before the sale can close. A financing contingency gives the buyer a set window to actually secure a mortgage; a home inspection contingency lets the buyer walk away or renegotiate if the inspection turns up something they can't live with. Both protect the buyer, not you, which is exactly why a seller should read them before accepting an offer, not after. An as-is sale means you're not promising to make repairs or improvements before closing, and the buyer is agreeing to take the house in its current condition. It doesn't erase your legal duty to disclose known problems, and it doesn't mean the house has to be falling apart, plenty of as-is homes are in good shape. It just means the repair conversation is off the table once both sides sign. Then there's novation, the term Cash Flow Deals actually builds its process around. A novation is a three-party swap: the original party in a contract steps out completely, a new party steps in, and everyone involved has to consent in writing before it's real. Think of it less like a resale and more like a relay handoff, the baton passes straight to the incoming party, and the one who handed it off owes nothing further. Cash Flow Deals is a Florida real estate investor that locks in a net price for a seller's house before repairs are scoped, using a novation-based, flat-fee process arranged through its licensed FL brokerage partner, Silver Door Realty — not a traditional listing, and not a brokerage itself. If the buyer's financing falls through, Cash Flow Deals closes as the buyer at that same locked price. The one exception: if something structural surfaces that was not visible or disclosed before we signed — foundation issues, hidden moisture, old wiring, cast-iron drain failure — we re-cost it and bring the number back to you. You decide. You can walk away. We disclose what we know at offer time so this almost never happens.
The Title Terms: What Has to Be Clean Before You Can Close
Title is the legal right to own and control your property, distinct from the physical deed that transfers it. A clear title means no outside party has a competing legal claim: you can sell without a legal obstacle standing in the way, and your buyer can get financing and title insurance without a hitch. A cloud on title, sometimes called a title defect, is any unresolved claim, lien, or paperwork gap that would make a reasonable buyer's attorney pause before signing off. The most common cloud is a lien: a legal claim a creditor holds against your property, usually because of unpaid property taxes, an unpaid contractor's bill, or a court judgment, and it has to be satisfied or resolved before a clean sale can close. An encumbrance is the broader category liens fall under: any claim, restriction, or right that affects how you can use or transfer your property, without necessarily stopping the transfer outright. Some encumbrances are financial, like a lien; others are non-financial, like an easement or a zoning restriction that limits what you're allowed to build. When you actually transfer ownership, you do it with a deed. A general warranty deed guarantees the buyer that you hold clear title going all the way back through the property's history, the strongest promise a seller can make. A quitclaim deed makes no such guarantee: it transfers whatever interest you have, if any, and is typically used between family members or when no money changes hands rather than in an arm's-length sale. If a title search on your house turns up an old lien or a name that was never taken off the deed, you're not alone, and it's fixable, but it has to be resolved before a title company will issue clear title to your buyer.
Where These Terms Show Up If You Sell to Cash Flow Deals
You don't need all fourteen of these terms to sell your house, but you need to recognize them when they show up in a contract, an appraisal, or a title report, because each one can move your number. Here's where they show up in Cash Flow Deals' own process. 1. Comparative market analysis: the walkthrough and local comps set the number before any offer is written. 2. Net price: locked in writing before repairs are scoped, arranged through Silver Door Realty. 3. Title search: run early, so a lien or a cloud on title surfaces before closing week instead of during it. 4. Closing: one novation, one closing date set by you, one settlement statement with the fee shown as its own line, not folded into anything else.
Common questions
Who keeps the earnest money if a home sale falls through?
It depends on why the deal fell apart. If a contingency in the contract protects the buyer, like an inspection or financing contingency that wasn't met, the earnest money is usually returned. If the buyer backs out for a reason the contract doesn't protect, the seller may get to keep it. The money sits in a neutral escrow account the whole time, not with either party, until that question gets resolved.
Who pays for an appraisal gap, the buyer or the seller?
Usually the buyer. A lender won't finance more than the appraised value, so if the appraisal comes in under the contract price, the buyer either covers the difference in cash, renegotiates the price, or walks away, unless the seller agrees to drop the price or split the gap.
Does selling a house as-is mean I don't have to disclose problems?
No. An as-is sale means you're not agreeing to make repairs before closing, but it does not remove your legal duty to disclose known problems with the house. Buyers still get to inspect, and sellers who hide a known defect can still be held liable for it later.
What's the difference between a lien and an encumbrance?
A lien is a specific kind of encumbrance, a legal claim tied to unpaid debt. Encumbrance is the broader term for anything, financial or not, that affects how you can use or transfer your property, from a lien to an easement to a zoning restriction.
Is under contract the same as pending?
Not usually. Under contract typically means the seller accepted an offer but contingencies like inspection, appraisal, or financing are still open. Pending usually means those contingencies cleared and the sale is close to the finish line. Exact usage can vary by local MLS.
What does novation mean, and why does Cash Flow Deals use it?
A novation swaps one party out of a contract and a new party in, with everyone's written consent, so the original party owes nothing further. Cash Flow Deals uses a novation-based process so title transfers once, directly from seller to buyer, instead of stacking two separate closings.