Home Buyers, Home Sellers
Terms to Be Aware of in a Real Estate Transaction
A real estate purchase can be confusing, especially if the jargon involved is new to you. Whether you are buying or selling a home, these are terms you should know to fully understand the process:
General Real Estate Terms
As-Is - A property that is marketed “as-is” usually indicates that the seller is unwilling to fix repairs. This term can also mean that the price is typically lower than market pricing in the area.
Buyer’s Agent - A buyer’s agent is a licensed real estate professional whose job is to locate a property for a buyer, negotiate, and obtain the best price.
Listing Agent - A listing agent is a licensed real estate professional whose job is to market the seller’s property, negotiate, and secure the best price for the seller.
Closing - The home sale is final and includes all parties' signatures on required documents, all monies accepted, and full lender's approval. Once all of these items are complete, the buyer is given full access to the property.
Days on Market (DOM) - The number of days from when the property was listed for sale to when the seller signs the sale contract with the buyer.
Homeowner’s Association (HOA) - A private association that manages a community or condominium complex. If you purchase a property that is managed by an HOA, you agree to abide by their rules and pay monthly dues. If you fail to pay, you risk foreclosure.
Multiple Listing Service (MLS) - A database that allows agents and broker members to access information about properties for sale in a given area. Once a home is listed for sale, it will get logged into the local MLS by a listing agent.
Real Estate Listing and Property Terms
Conventional Sales - This is when a property is owned outright or the owner owes less on their mortgage than what the property could sell for. These are often smoother transactions than non-conventional sales, such as foreclosures.
Real-Estate Owned (REO) - A designation given to properties owned by a lender due to an unsuccessful foreclosure at an auction. REO homes can sometimes present an opportunity for a buyer to purchase below market value.
Short Sale - This is when the property is selling for less than the debt secured by the property. Short sales require the approval of the seller’s lender since the proceeds of the sale will just be “short” of the amount owed.
Trust Sale - This means that the home is being sold by a trustee of a living trust. This is normally because the original homeowner passed away or placed their assets in a living trust.
Financial Real Estate Terms
Adjustable-Rate Mortgage (ARM) - This type of loan has interest rates that can change after a fixed rate period based on the interest rate index the ARM is tied to. This type of loan is less predictable than a traditional fix-rate mortgage, but can sometimes yield lower interest rates.
Debt-to-Income Ratio - This is determined by the total of your debt expenses, plus your monthly income, then multiplied by 100. This ratio allows lenders to estimate how much you can afford to pay monthly for a mortgage.
Equity - This is the investment a homeowner has in their home. To calculate equity, take the market value of the home and subtract any mortgages against the property. The amount leftover is the equity you have in the home.
FHA Loan - These loans have attractive financing rates and less stringent lending requirements than conventional mortgages. They are often appealing options for buyers with lower credit scores and smaller down payments. These loans require two types of mortgage insurance: an upfront premium and an annual premium.
Fixed-Rate Mortgage - This type of loan has a fixed interest rate for the life of the loan. They are often available as 10, 15, 20, and 30-year loans.
Pre-Approval - This process allows a lender to determine a buyer's financial situation. Lenders will look at debt-to-income ratio, ability to repay, and current credit score. The lender will then give the buyer a letter stating the exact loan amount they are pre-approved for.
Pre-Qualification - A lender’s estimate of the amount a homebuyer can expect to be approved for during the loan process. This is a quick assessment based solely on what the buyer tells a lender, not on actual proof.
Offers and Contingency Terms
Appraisal - This is required to gather the estimated value of a piece of real estate. The mortgage lender will send out an appraiser during the home sale to get the value of the property. This helps the lender decide if the property is worth the amount of the loan the potential buyer is seeking.
Home Sale Contingency - The home sale relies on a buyer's ability to finalize a close on their current home.
Inspection Contingency - Also known as “due diligence contingency,” this grants buyers a pre-determined amount of time during escrow to perform any necessary inspections.
Loan Contingency - A clause or addendum in a contract that allows a buyer to back out of a deal and keep their deposit if they are unable to secure a mortgage.
A real estate purchase can be hard to navigate, but with the right team at HomeHunt, it will be an easy process. Contact us today to get started!