Real Estate Terms for Home Buyers
The purchase of a home is probably one of the most complex transactions you will ever complete in your life. As your agents, we will be with you every step of the way, but it's still important for you to you feel comfortable and confident about the process. Here is a list of real estate terms you should understand before beginning your home purchase.
An appraisal is the process of determining the value of a home based on factors like the condition of the property, its location, any upgrades it might have, and the selling prices of similar homes in the area. Lenders typically require a formal appraisal during the mortgage loan process to ensure that the amount of money financed isn't greater than the value of the property.
Closing costs are fees associated with the home buying process, like appraisal fees, credit check fees, escrow fees, etc. The typical home buyer can expect to pay about 2% – 5% of the purchase price of the home in closing costs.
Contingencies are conditions placed on the offer on a home that must be met by both the buyer and the seller before closing. Failure of either party to meet the conditions of the offer may void the contract.
Due diligence is a period of time when buyers are expected to evaluate the property before closing the deal. This includes things like a home inspection, a title search, surveys, and an appraisal.
A buyer gives the seller earnest money to indicate that he or she is serious about the transaction. If the buyer fails to follow through on the purchase, the seller gets to keep the money.
Equity is the difference between what is owed on a mortgage and the market value of the home. It's essentially how much ownership a homeowner has in their home.
During a transaction, a third party holds the buyer's money so that the seller can see that they have it. Then, at closing, the buyer receives the title/deed and the funds are released to the seller.
Homeowners Association (HOA)
Some communities have associations to ensure that the neighborhood and its amenities are well maintained. Residents are required to pay fees and abide by a set of rules established and enforced by this association.
A home inspection is an examination of a property's physical condition before a sale.
Multiple Listing Service (MLS)
The MLS is an online database of regional properties for sale.
A mortgage is a loan that a bank or lender gives the buyer to help finance the purchase of a home. If the buyer stops paying the mortgage, the lender can repossess the home.
Principal is the amount of money a buyer borrows to purchase a home.
More Home Buying Resources
We know that buying a home is very exciting but it can also be very scary. That's why we want to help take away some of the stress by arming you with the resources you need for a smooth transaction. If you have any questions at all don't hesitate to reach out!