If you are new to the home buying process, it can seem intimidating. You’re entering into the biggest financial transaction you’ve undertaken so far in your life, and there are real legal and financial consequences if things go wrong. You want to be prepared, but sometimes just understanding the terminology commonly used in real estate can be a challenge. To help you out, we’ve compiled a list of some of the most commonly used real estate terms you’ll likely encounter as a new buyer, and their definitions, so that you can start your home search with confidence.
- Appraisal – A written analysis provided by a real estate appraiser that provides the estimated value of a home. Banks typically require appraisals to ensure that the mortgage loan amount is in line with the property’s estimated value.
- Assessed Value – The value of a property, as determined by a governing authority, that is the basis for property taxes and fees.
- Buyer’s Agent – A real estate agent that represents the buyer and their interests in a real estate transaction.
- Closing Costs – Fees associated with the closing of a real estate transaction. These fees vary, but could include credit reporting fees, escrow deposits for taxes and insurance, inspection and appraisal fees, title fees, recording fees, and underwriting or loan associated fees.
- Contingencies – Conditions that must be met in order to proceed to closing on the sale of a home. Typical contingencies include inspection, financing, and sometimes the sale of the buyer’s current home.
- Earnest Money – Sometimes referred to as a “good faith” deposit, this is money that the buyer pays in advance towards the purchase price of the home. It shows that the buyer is serious in their intent to purchase the home – it is held by a neutral third party until closing.
- Inspection – A thorough inspection of the home, performed by a licensed home inspector, to identify any issues with the structural or mechanical integrity of the home.
- Listing Agent – A realtor who presents a seller’s home for sale, and represents the seller and their interests in a real estate transaction.
- Offer – A proposal to purchase a home that, when accepted by both buying and selling parties, becomes a sales contract.
- Pre-Approval – A lender’s written guarantee to provide the buyer with a loan of “up to” a specified amount. A pre-approval can strengthen a buyer’s offer to purchase, since the seller can be reasonably assured that the buyer will qualify for the financing needed to purchase the home.
- Pre-Qualification – Less of a guarantee than a pre-approval, this is basically just an estimate of what you could qualify for as a buyer. This is a good first step for buyers to understand what their price range should be, but not as much of an asset when writing an offer.
- Sales Contract – When an offer to purchase a home is accepted by both the buyer and seller, it becomes a legal contract between the two parties to purchase a home for a specified amount and subject to specific conditions (contingencies).
It should be noted, that your best asset when starting your home search, is a qualified buyer’s agent. Not only can they explain these terms (and others) that you’re likely to encounter along the way, they can guide and help you make informed decisions with your best interests at heart. A buyer’s agent is your advocate and has the experience and skill to negotiate on your behalf to ensure that you get the best price on the best home for you – one that you will build many memories in for years to come. At Restaino & Associates, we LOVE our buyers. If you’re getting ready to start your home search, contact us today!