Buying a home is complicated enough. Learning the real estate language is an important part of chasing the loop while you’re buying your home. These 10 definitions of commonly misunderstood real estate terms will avoid you being an informed home buyer.
1) Appraisal
An appraisal is an assessment done by a certified appraiser justifying the purchase price for a property. The appraisal is termed on an analysis of comparable sales of kind of same homes in the locality nearby.
2) Commission
Commission refers to the amount that is paid to real estate agents after the closing of the transaction. Their percentage of the purchase price usually goes from 3% to 6%.
3) CMA (Comparative Market Analysis)
A CMA is a professional report that agents give to their clients. The report is an analysis done on the values of similar homes around or area that have sold or are for sale at that time. This report helps the clients by a realistic listing and selling price.
4) Earnest Money
Earnest money is a deposit made by the potential house buyer to show that he/she is serious about purchasing the home. The funds are put on the buyer’s down payment when the project is finalized.
5) Escrow
To place something in escrow means to place it on a third party until certain conditions are fulfilled. For example, when the transaction is closed, earnest money deposits are often put into escrow until they are delivered to the seller.
6) Equity
A homeowner’s financial interest in a property is known as Equity. It is the difference between the market value of the house or property and the amount still owned on its mortgage and other liens.
7) Lien
When the property is sold, there is a legal claim against a property that must be paid off; that is called a Lien. A mortgage or first trust deed, both are considered liens.
8) REPC (Real Estate Purchase Contract)
A contract between parties for the purchase and sale of real estate is known as The Real Estate Purchase Contract. They are written down and signed by both parties and are legally bind.
9) Short Sale vs. Bank Owned Home
The lender may allow the home to be sold in a short sale. What that means is that the bank has agreed to let the home be sold for less than what the current owner owes on the property. Whereas on the other hand, a bank owned home is a home that has been foreclosed but the lender has not given the permission to sell the home for less than what is owed on it.
10) Under Contract
When the seller has accepted the buyer’s offer to purchase the property, the property is said to be “under contract”. Most of the time, the buyer is given a time period in which the sale can be finalized. During this period, the seller cannot entertain any other offers from other new buyers.