Patrick Russo, Realtor®'s Blog
It can feel like real estate has its own language. After all, there is a reason agents take courses and need to become licensed!
And for a first-time buyer, I understand that it can be overwhelming and very confusing to keep track of all of this new information on top choosing the home of your dreams and planning a move.
Which is why I’ve created this quick and dirty list of real estate terms every first time home buyer needs to know.
Let’s get started:
A kick-out clause gives the seller the option to continue showing a house after a buyer has made their offer but is slowing down the process with the sale of their own home. The seller can then “kick out” that offer if someone else puts in a more desirable, and readily available, one.
A title-search is simply a search to pull up relevant information to the title of a house. It helps to determine the history of the home and if there are existing regulations in place that affect the property.
Escrow is a neutral third party used to handle transactions throughout the buying/selling process. They hold all related documents and funds until the day of the sale.
Earnest money is usually held in an escrow account and represents your commitment to the sale of a house you have made an offer on. Typically, the amount out down is between 1-3% of the asking price. It is also called “good faith money”.
An appraisal determines a property’s market value. Only a licensed appraiser can pull a report of this information for you. This is the report a lender will use to determine whether or not to lend money to a borrower.
Closing costs are paid at the actual sale of the house. The “closing” is when the title is transferred from the seller over to the buyer. The cost covers all of the fees that were incurred throughout the buying and selling process. A few examples of these fees are the home inspection, appraisal, and escrow.
A comparative market analysis or CMA is a report pulled from a database your real estate agent has access to. This is then used to determine the offering and asking price of homes.
A contingency is when in order to move forward with a sale there are specific requirements the buyer must complete first. Common contingencies are: waiting on an inspection, pre-approval or signing.
Disclosures are required by law. But what are they? A disclosure means a seller has to inform potential buyers of and problems that would affect the value of the property.
Due diligence is doing the work of fully understanding the property you are interested in before buying it. This includes obtaining insurance, reviewing all documents carefully and walking the property.
During a home inspection appliances, plumbing and electrical work are tested. The heating and cooling system are also inspected. This doesn’t affect the monetary value of your home. This is a way for you to determine what state a home is in and if it is worth the financial investment to you.