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Most Commonly Used Real Estate Terms

The process of buying or selling a home can be confusing and a learning experience. Even if you have already been through it before, I wanted to provide some real estate terms that can be very helpful when dealing with your agent, title company, lender/bank, etc. There are many more terms that I could have included, however, here is a basic rundown of what you will come across.

Contract: The purchase and sale documents that lays out the terms of the deal; for example - price, loan type, title insurance, escrow instructions, when to close and what stays or goes.

Earnest Money: The amount you pay to accompany your initial offer. It is a monetary commitment to purchase the property. It is also used as liquid damages to the seller when the buyer backs out of the deal without proper reason. There are many contingencies in place to protect your earnest money if you are unable to fully perform and execute the agreement.

Inspection: An independent licensed home inspector is hired by the buyer to review the home in its entirety. If any repairs are needed the buyer can negotiate these repairs with the seller to be completed by the seller at the seller's cost. Sometimes a buyer can negotiate the price down and assume responsibility for the repairs.

Commission: Money paid to the real estate agents involved in a transaction for their real estate services. Typically, commission is paid by the seller and is negotiated at the time the listing is taken. Buyers do not pay a commission unless arranged with their agent prior to purchasing a home.

Comparables: Homes similar in lot size, square footage, number of bedrooms and bathrooms, amenities and area. Comparables are widely used when listing a home for sale or comparing price on a purchase

Equity: If your home is worth more than you owe on it, you have equity. The longer you own your home the more equity you build. Many people draw their equity out when they refinance to remodel their home or pay off debt.

Short Sale: The seller owes more on the home than it can be sold for and has to negotiate with the lien holder (or bank) to take payment short of what is owed. Usually a short sale takes place when someone is in pre-foresclosure and sells the home prior to the bank foreclosing on the property. The short sale process can take months to completion.

Bank-Owned: These properties have been foreclosed on and the bank owns the homes. The bank, as a rule, does no repairs. They may do minor cosmetic fixes just to make the property sellable. They list them at a low price so they will sell fast. Foreclosure is a very expensive process for the bank so usually they will price a home to recoup the balance owed, taxes, attorney's fees and other legal expenses.

Fixer Upper: Any home that needs repairs. A cosmetic fixer needs minor repairs, no structural damage. A major fixer usually needs serious work.

Hope you found this helpful. Stay tuned for another post on commonly used terms in Title & Escrow and Home Lending.


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