Purchasing a new home presents the buyer with a number of challenges, including the terminology used by real estate agents and banks. Taking the time to learn some of the “lingo” ahead of time will give you confidence and help you avoid making a costly mistake.
Listing Agent and Buyers Agent – The listing agent works with and represents the home seller and is responsible for paying the commission due to the buyer’s agent, who represents the home buyer. You will have no occasion to deal with the listing agent prior to the closing. Your buyer’s agent makes all arrangements with the seller’s representative.
Which Mortgage Is Which? – Your conventional home mortgage loan may be a fixed rate or an adjustable rate. If you plan to stay in your home for more than five years, the best option is a fixed rate, by which you pay a predetermined interest for the life of the loan. If you plan to refinance your home or are going to remodel and sell it within a short time, an adjustable rate mortgage may be the better choice and save you money. Which mortgage is which?
Listing – A listing is simply a home or property that is advertised for sale. When browsing through a real estate web site you will find that listings include a considerable amount of information about the property, including price, bathrooms, bedrooms, square footage and amenities. Many real estate websites link to a multi-list service, which offers a view of all the homes for sale in a given area.
Pre-Approval Letter – A must have in todays’ market. Once you have made the decision to purchase a home, the first step is to obtain a pre-approval letter from the bank that will be issuing you the mortgage loan. The pre-approval letter provides an estimate of what the bank will lend you and lets the seller know that you can get the mortgage loan if you decide to purchase his or her home.
Home Inspection – When you decide you want a home and make an offer, the next thing you must do is get a home inspection. The inspection will cost between $500 and $1,000. Everything will be checked including the electrical, plumbing, heating, air conditioning, foundation and appliances. Ask your real estate agent to recommend a good inspector. If anything is found to be in need of repair, the seller might be willing to repair it or reduce the price accordingly.
Home Appraisal – The bank will send an appraiser to the home you want to buy, once you fill out the mortgage application. An appraiser is licensed by the state, and will look at comparable properties in the area before estimating the value of the home. He or she will also do a property investigation as part of the appraisal process. If the home is appraised at less than the asking price, you may not get the loan for that home.
Contingency – Before you purchase the home you want, there are certain conditions that must be met called contingencies, and these contingencies can be included in the offer you make. Some examples of contingencies include having your loan approved, certain repairs made prior to closing, your present home selling in order to purchase the new home, and even if the appraisal is high, indicating a possible over-inflated value. All these conditions must be put in writing for them to be effective.
Purchasing a home is much easier when you understand the terminology of real estate.
If you are considering buying or selling a home we would love to hear from you. Please contact us or give us a call.