Glossary

Key terms and definitions used across Resale Profit Guide.

Appraisal Gap
The difference between a home's appraised value and the agreed-upon purchase price, which can require the buyer to cover the gap with cash. Resale homes are more prone to appraisal gaps in hot markets where bidding wars push prices above comparable sales.
Builder Markup
The premium a builder charges above the actual cost of construction materials and labor to cover overhead and profit. Understanding builder markup helps buyers compare the true cost of new construction against similarly featured resale homes.
Building Code
The set of regulations governing the design, construction, and materials used in buildings to ensure safety and structural integrity. Older resale homes may not meet current building codes, which can affect renovation costs and insurability.
CAT Bond
A catastrophe bond, a high-yield debt instrument designed to raise money for insurance companies in the event of a natural disaster. Rising CAT bond costs in disaster-prone areas can increase homeowners insurance premiums for both resale and new construction.
Certificate of Occupancy
A document issued by the local government confirming that a building meets all building codes and is safe for habitation. New construction requires one before move-in, while resale homes may need an updated certificate after major renovations.
Closing Costs
The fees and expenses beyond the purchase price paid at the closing of a real estate transaction, typically ranging from 2% to 5% of the home price. Closing costs can differ significantly between resale homes and new construction due to builder incentives and negotiation dynamics.
Comps (Comparable Sales)
Recently sold properties similar in size, condition, and location used to determine a home's fair market value. Resale homes generally have more available comps than new construction in developing subdivisions.
Deferred Maintenance
Repairs and upkeep that have been postponed by previous owners, accumulating as a hidden cost for the next buyer. It is one of the biggest financial risks of buying a resale home and should be carefully evaluated during inspection.
Energy Audit
A professional assessment of a home's energy efficiency that identifies areas of energy loss and recommends improvements. Resale homes often benefit from an energy audit since older construction typically lacks modern insulation and efficient systems.
Escrow
A neutral third-party account that holds funds and documents during a real estate transaction until all conditions are met. Both resale and new construction purchases use escrow, but the timelines and contingencies can differ significantly.
Foundation Repair
The process of fixing structural issues in a home's foundation, such as cracks, settling, or water damage, which can cost thousands to tens of thousands of dollars. Foundation problems are a primary concern with resale homes and a key reason thorough inspections matter.
Home Inspection
A professional examination of a home's physical condition, covering the structure, roof, plumbing, electrical, and major systems. Home inspections are essential for resale purchases but are often waived or limited in new construction, which is a mistake.
Home Warranty
A service contract that covers repair or replacement of major home systems and appliances for a set period, typically one year. Builders usually include a warranty with new construction, while resale buyers often purchase one separately for peace of mind.
Homeowners Insurance
Insurance that covers damage to your home and personal property from events like fire, storms, and theft, plus liability protection. Older resale homes often have higher insurance premiums than new construction due to outdated wiring, plumbing, or roofing.
HVAC System
The heating, ventilation, and air conditioning system that controls a home's climate, with a typical lifespan of 15 to 25 years. Evaluating HVAC age and condition is critical when comparing resale homes to new construction, which comes with new, warranted systems.
Lead Paint
Paint containing lead that was commonly used in homes built before 1978, posing serious health risks especially to children. Resale homes built before 1978 require a lead paint disclosure, and remediation can be a significant added cost.
Lot Size Premium
The additional cost associated with a larger or more desirable lot, such as a corner lot, cul-de-sac, or lot with a view. In new construction, builders charge explicit lot premiums, while in resale homes the premium is embedded in the overall price.
Owner's Title Insurance
An insurance policy that protects the buyer against future claims or disputes over property ownership that were not discovered during the title search. It is especially important for resale homes with longer ownership histories that increase the chance of title issues.
Permit
Official approval from the local government required before starting construction or major renovations to ensure compliance with building codes. Unpermitted work on resale homes is a common issue that can create legal and financial problems for the new owner.
Property Tax Assessment
The value assigned to a property by the local tax assessor, used to calculate annual property taxes. New construction is often reassessed at the full purchase price, while resale homes may benefit from lower legacy assessments in some jurisdictions.
Radon
A colorless, odorless radioactive gas that can seep into homes through the foundation and increase the risk of lung cancer. Radon testing is a recommended part of any resale home inspection, and mitigation systems cost between $800 and $2,500 if levels are high.
Resale Value
The estimated price a home will command when sold in the future, influenced by location, condition, upgrades, and market trends. Comparing the long-term resale value of existing homes versus new construction is central to making a smart buying decision.
Roof Lifespan
The expected useful life of a roofing system, which varies by material: asphalt shingles last 20 to 30 years, metal 40 to 70 years, and tile 50 or more years. Knowing the roof age on a resale home is critical because replacement is one of the most expensive home repairs.
Sewer Scope Inspection
A camera inspection of a home's sewer line from the house to the street to check for blockages, cracks, root intrusion, or collapsed sections. It is highly recommended for resale homes with older plumbing, as sewer line replacement can cost $5,000 to $25,000.
Special Assessment
A one-time charge levied by a municipality or HOA for specific improvements such as road repaving, sidewalks, or infrastructure upgrades. Buyers of resale homes should verify whether any pending special assessments exist before closing.
TCO (Total Cost of Ownership)
The complete cost of owning a home over time, including purchase price, maintenance, repairs, insurance, taxes, and energy costs. Comparing TCO rather than just sticker price reveals the true financial difference between resale homes and new construction.
Termite Bond
A contract with a pest control company that provides ongoing termite protection, including regular inspections and treatment if termites are found. Maintaining a termite bond is important for resale homes, and a lapsed bond can be a red flag during due diligence.
Zoning Variance
An approved exception to the local zoning ordinance that allows a property to be used in a way not normally permitted by its zoning classification. Resale homes with existing variances can offer unique opportunities, but buyers should verify the variance transfers with the sale.