13 Real Estate Terms You Should Know Before Buying Your First Home
When the time comes to purchase your first home, the foreign words you’ll find your agent using may seem overwhelming. What are closing costs? What is an escrow? You’ll feel even more lost in an already stressful process. So prepare ahead of time! Below we’ve laid out a simple guide of 13 terms that’ll make you look like a real estate pro!
1. Buyer’s Agent - The agent who represents the buyers in a real estate transaction. This person will conduct all negotiations between the buyers and the sellers.
2. Listing Agent/Selling Agent - Interchangeable terms, with the same meaning. This is a real estate professional that represents the sellers in a transaction. They also have the responsibility of receiving offers from agents, presenting those to clients, and helping them decide on the best offer.
3. Contingencies - Actions the seller must take to make the property acceptable to the buyer. Contingencies are often based on the findings of the home inspector.
4. Closing Costs - The fees incurred when buying property, typically 2% to 5% of the total mortgage amount. These fees are due at closing.
5. Escrow - A fund guarded by a third party during a transaction, not to be released or distributed until closing.
6. Earnest Money - Funds sent to the seller, from the buyer, along with an offer letter. You may also hear the term “good faith money”.
7. Home Inspection - The process of a qualified third party assessing the condition of the home. The trusted professional will inform the buyer whether the property needs repairs done, or if it is in tip-top shape.
8. Fixed Rate Mortgage - Conventional loan with a predetermined interest rate for the majority of the loan’s duration. Traditionally 30 years in length, but can differ due to circumstances.
9. Adjustable Rate Mortgage - A mortgage that typically has a lower initial rate for a set time, then the rate may go up or down, depending on the index rate. Typically used for short-term ownership.
10. Pre-Approval Letter - A letter that indicates the amount of money that the bank is willing to extend to a borrower. An essential item to obtain before starting the house hunting process.
11. Pre-Qualified Buyer - An individual seeking a real estate investment that is in possession of a pre-approval letter.
12. Appraisal - The estimated value of a property based on a qualified appraiser’s analysis. An essential step to the real estate investment process, as banks typically require appraisals before issuing loans.
13. Assessed Value - Value of a property determined by an authority figure to levy a tax or fee on the property owner.