Definitions

Contingencies are conditions that the buyer puts on an offer which must be met before the offer is considered final. If the contingencies are not met, a buyer's earnest money is returned and the transaction does not close. Examples of typical contingencies include:

• Financing contingency: the offer is subject to the buyer getting financing to purchase the home.
• Inspection contingency: the buyers will have the property inspected, at the buyers' cost, and the offer depends on the results of the inspection. They buyers typically submit a list of repairs they would like to be made before they make the offer final.
• Sale contingency: if the buyers are selling another home and plan to use the proceeds as a down payment on the property, they may use a sale contingency. This means the offer is not final until the buyers close on the sale of their own home.

Read more about contingencies on Wikipedia

Earnest money is a downpayment on an offer by the buyer that is intended as a signal of the buyer's seriousness. These funds, typically 1 - 3% of the offer prices, act as a deposit on the property and are held in escrow pending the outcome of the offer. If the offer is rejected, the buyer gets the money back. If the offer is accepted and the buyer later backs out of it, the seller keeps the money. If the offer is accepted and closes, the money goes toward the purchase price of the home. If the offer was a contingent one, and all the contingencies are not met prior to close, the earnest money is returned to the buyer and the transaction does not close.

Escrow is an arrangement in which the earnest money is held on behalf of the buyer and the seller by an impartial third party, often the real estate agent or the title company. Escrow may also refer to the process of closing the transaction, which includes disbursing funds for fees and title insurance, ensuring that all contingencies are met, and finally transferring the purchase price of the home. Read more about escrow on Wikipedia.

Foreclosure is a process whereby a lender can take possession of a home and sell it to recover the amount owed on the mortgage, if the mortgage loan is in default. Foreclosure begins when a borrower stops making mortgage payments. The lender can choose to file a Notice of Default or Lis Pendens, which is a public notice that the loan is in default. The borrower can pay off the amount in default; or the lender can take possession of the home and sell it. There are three phases of foreclosure during which the home can be sold. Note that if you choose to buy a home in foreclosure, Redfin can only act as your broker if the home is listed in the MLS, which usually means it's bank-owned.

• Pre-foreclosure: At this point the lender has filed a Notice of Default, and the borrower has a grace period during which she can pay off the amount owed. To buy a home in pre-foreclosure, you need to approach the home owner directly. The owner may try to avoid foreclosure buy selling the home as a short sale, or one in which the owner owes more money on his mortgage than he will get from selling the property. Short sales require bank approval and can involve long waiting periods. More on short sales.
• Auction: If the borrower is not able to reinstate the loan, the lending bank may put the home up for auction. A home bought at auction can be a great bargain, but bidders typically have very little time to research the home and may have to pay all cash. Note that homes in auction are bought as-is; the buyer does not have a chance to inspect the home or ask for repairs. In addition, if the house is occupied, it is the responsibility of the new owner to evict the occupants.
• Bank-owned: If the lender, typically a bank, takes possession of the property, it will usually put the home up for sale. It may do this on its website or by listing the home in the MLS. You can view bank-listed foreclosures on Redfin's search site by choosing to include them in your search criteria. However, unless a bank-owned foreclosure is also listed for sale in the MLS, you cannot work with Redfin as your broker to buy it.

A for-sale-by-owner home is a home that the owner has advertised for sale without working with a listing agent. A for-sale-by-owner home may be listed on a number of for-sale-by-owner websites, and in some cases may also be listed in an MLS. If the home is listed in the MLS, you can work with Redfin as your broker to buy the home.

A mortgage broker is someone who, for a fee, helps you shop around among different lenders to find the best deal. Sometimes you can get the best deal by working directly with a lender, but surprisingly the broker often has access to more competitive rates.

A Multiple Listing Service is a private database that allows real estate brokers to share information about listings on the market. In a given market, most properties for sale will be listed in the MLS. There are multiple MLS systems in the US, and sometimes several in a single county or area. Access is typically limited to real estate brokers, who list properties on behalf of their customers. However, broker-operated websites such as Redfin now make it possible for buyers to view MLS listings online. Read more about the MLS on Wikipedia.

A pre-inspection is an inspection completed before a buyer makes an offer. An inspection is a thorough review of a property from the attic to the foundation, performed by an independent expert whom you hire to protect your interests. Typically, you hire an inspector after making an offer on a house or condominium, to ensure that you understand all the problems with the property you're buying.

When buying in a competitive market, you may want to arrange for a pre-inspection, so you don't have to make your offer contingent on the inspection. The problem with this approach is that an inspection can cost you $400 or more, depending on the size of the place, and the money will be wasted if the seller doesn't accept your offer. On the other hand, if you are competing against other buyers, your offer will be stronger: you'll have already accounted for all the problems with the property, so you won't have to haggle over the cost of repairs after the offer has been accepted.

You can get a list of recommended inspectors from Redfin by calling 877-973-3346, or by asking a question in Redfin Forums.

Title insurance protects against losses resulting from undiscovered title defects, such a claims on the property or an invalid title. An owner's policy protects the buyer, while a mortgagee's policy protects the buyer's lender. Read more about title insurance on Wikipedia.