Whether you are buying or selling a home, you may come across plenty of real estate terms that you do not recognize. However, it’s important to be familiar with the common real estate terms that you will encounter throughout the process because it will make the process much easier. Here are several common real estate terms you should know:
Appraisal – The estimated value of a property as calculated by a licensed appraiser. An appraisal makes sure that the amount a buyer is under contract to pay for a property is equal to or less than the amount calculated by the appraiser. If a home “doesn’t appraise”, it means the seller must either agree to lower the sale price of the home to the appraised amount, or the buyer can walk away from the contract. This is ordered by the lender, and paid for by the buyer as part of closing costs.
Closing Costs – The fees paid at closing, including loan origination fees, attorney fees, appraisal fees, survey fees, title insurance, title search fees, underwriting fees, etc.
Contingency – A condition that must be met in order for the contract to become legally binding. In real estate, the sale contingencies are financing, the home inspection, and appraisal. If a contingency is not met, it allows the buyer to walk away from the contract and get their earnest money back.
Down Payment – The amount of money that a home buyer pays out of pocket towards purchasing a home. The down payment required for a buyer depends upon the type of home loan being utilized. Some loan programs allow for as little as 3% down.
Earnest Money – An amount of money (typically 1-2% of sale price) that a home buyer provides with their offer to the seller to show good faith. The check is cashed by the broker as soon as the offer is accepted, and is held in a non-interest bearing account until closing. If the sale falls through due to one of the contingencies on the contract (financing, inspections, or appraisal), the earnest money goes back to the buyer.
Home Inspection – A contingency on the purchase contract that allows for the buyer to hire a home inspector to conduct a thorough inspection of the home, which can also include radon tests, termite inspections, air quality tests, etc.
Home Warranty – A service contract that protects a home owner from the high costs of repairing and/or replacing major home components, such as the hot water heater, furnace, AC system, etc.
MLS – A database, also known as the Multiple Listing Service, that Realtors have access to that shows all homes currently listed for sale.
Pre Approval – A dry run of the loan process. A mortgage lender gathers information from a potential home buyer regarding income, debts, assets, etc. to determine how much home the buyer can afford. A pre approval letter is required to submit an offer on a home.
Title Insurance – Insurance that protects the buyer (or the seller) from any potential disputes regarding ownership of the property. It’s always a good idea to purchase title insurance.
Have any questions regarding these common real estate terms you should know? Ready to chat about your real estate plans? Contact The Lowry Team today!
The Lowry Team – Keller Williams Realty is an award winning, full service real estate firm specializing in West Chester, Liberty Township, Mason, Monroe and the Northern Suburbs of Cincinnati. The Lowry Team is “Different By Design”… taking a team approach to home buying and selling. The Lowry Team consists of members that are focused on areas of specialization including Listing Specialists, Buyer Specialists, Transaction/Listing Coordinator, Inside Sales Associate and a Marketing Director.
Don’t Hire an Agent…Hire a Team. The Lowry Team.
Buyers and Sellers can reach The Lowry Team Keller Williams at 513-874-1830.
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