Real Estate Terms Buyers & Sellers Need To Know
Jun 17, 2021
Real Estate Terms Home Buyers And Sellers Should Know
There's a lot of real estate lingo out there, and some of it can be downright difficult to understand (we're looking at you "back-end debt-to-income ratio" and you "front-end debt-to-income ratio"!).
Whether you're buying or selling a home, there are a few real estate terms you should know so that you can feel comfortable talking through the process.
Let's take a look at the definitions for a few of the terms you'll hear no matter which side of the housing market you're on.
Acceptance happens when a seller agrees to the terms of an offer by a buyer. A contract is formed once the seller signs to the terms of the purchase offer. At that point, neither the buyer or seller can back out without facing financial and legal consequences.
An appraisal is an estimate of the worth of a home. It's a process that's normally conducted by an appraiser who is an unbiased third party.
Appraisals are usually required by banks and lenders to determine the value of a property for the purpose of loans. If an appraisal comes in lower than the loan amount the loan may be refused, or the lender may ask the buyer to pay the difference in the price.
Closing costs are an assortment of fees owed to different people associated with the transfer of property. They can include lender fees and points; credit check fees; deed filing fees; real estate agent commissions; and attorneys' fees.
An earnest money deposit is also known as a good faith deposit. It's an initial payment made from the buyer to the seller once the offer is accepted. Oftentimes the earnest money deposit is 1 to 2% of the total purchase price. Payment of this deposit shows the buyers interest and sincerity in the purchase of the property.
An escrow account is maintained by a third party. Funds and documents are held by the third party until the closing of the sale.
An inspection is not to be confused with an appraisal. An inspection is conducted by a certified professional who is examining the condition of the home. Inspections include visual as well as functional testing of the components of the home.
Completed inspection reports are sent to the buyer along with recommendations on items which need to be repaired or replaced. Buyers will often request sellers complete or pay for some repairs.
Offers are the first step toward the final purchase of a home. It's a written contract that lists the terms of the sale of a home between the buyer and seller. The seller may return to the buyer with a counteroffer depending on the terms. Once both parties agree and sign the offer it becomes a legal contract between them.
Pre-approval is the process by which a lender judges the financial situation of a buyer.
Being pre-approved by a bank or lender can give a buyer a leg-up over others who aren't pre-approved and trying to purchase the same home. Because they are approved for a loan of a certain amount, it can also strengthen a buyer's position with the seller.
LEARN ALL THE LINGO WITH ORIZON
Our experienced staff at Orizon Real Estate know all the real estate terminology, and we're here to help explain it to you. If you're buying or selling a home, we can give you the peace of mind that only comes from working with professionals. Call us today at 260-248-8961 to connect with an Orizon Real Estate agent.