Real Estate Terminology

Before you invest you should know these 10 simple terms before you start looking at a home or investment.

• 1. Fixed Rate vs Adjustable Rate Mortgage
• Conventional loans include “fixed rate” & “adjustable rate” mortgages. A fixed rate mortgage has a predetermined interest rate throughout the life of the loan; the most common are for 30 years. Where an adjustable rate mortgage has a variable interest rate; the most common are for 5, 7, or 10 years.
• 2.Buyer’s Agent vs Listing Agent
• If you are buying any property, either for you to live in or for an investment property, there are two agents. The difference is simple…The Buyer’s Agent represents you, they will try to get you the best deal possible while the Listing Agent will represent the person Selling the property. You can have a Dual Agent, one who represents both parties, however, this is uncommon.*Remember the Agents commission is not paid out of your pocket, however, they do receive a percent from the sale of the house.
• 3.Pre-Approval Letter or Proof of Funds
• Many times when you are looking at a home the Seller may request that you have Proof of Funds or a Pre-Approval Letter. This is a letter from your bank or finance company that states an estimate of how much the will lend to you. This will allow them to see that you have the funds to purchase the property.
• 4.Listings
• Agents frequently refer to homes for sale as “listings.” A “listing” on a website shows information about the home, like the price and number of bedrooms. You can search engines like Zillow or Trulia to find many houses.
• 5.Inspections
• Many times, once you place a house under contract, you should ask an Inspector to go look at it for you. They will look over the house for every flaw possible. Many do not need to be repaired, it could be something as simple as a paint drop on a floor vent, however, there may be issues that need to be addressed such as termites, roof, foundation. If an inspection report comes back with items that are a concern, address them with the Listing Agent so they will take it to the Seller & perhaps some of those items can be fixed, or negotiate in the price.
• 6.Appraisal
• When you use finance money, the bank or finance company will want to have an appraisal of the property. The appraisal will show what the house is worth in the area you are buying. The Listing Agent should be able to give you a CMA (Comprehensive Market Analysis) this will show what other houses in the area has sold for.
• 7.ContingenciesWhen you find a home you will make an offer & may want to list contingencies in the contract. I will close by this date contingent upon financing, (your loan goes through); contingent on inspection (nothing extreme comes back on the inspection report); contingent on appraisal (the house appraises for what you are buying it for).
• 8.Offers & Contracts
• When you find a home or investment property you will want to put an Offer or a Contract on the house. This Offer should consist of the address you wish to purchase, the dollar amount & when you wish to close the transaction. This usually will be done through your Agent. The Seller may “Counter” your offer, ask for more money, a faster close date etc. If they do this, then you will need to accept or again “Counter” their offer.
• 9.Closing Costs
• Typically, closing costs will amount to 2-5% of the purchase price of the home, on top of the down payment. Common fees include excise tax, loan-processing costs and title insurance.
• 10.Title Insurance
• After all the negotiations are done and the seller has accepted your offer, you should receive a home title report. Most mortgage lenders require you to pay title insurance as part of the closing costs; title insurers search the public records to make sure the home seller actually had rights to the title and that there are no liens on the home (like an unpaid contractor or unpaid taxes).