Real Estate Basics – Learn the LingoPosted by Ansley Atlanta 04/06/2019
When you’re preparing to buy a home, it feels like you need to learn a new language to keep up with all the unfamiliar terminology you hear. To help first-time (and experienced) buyers understand this unfamiliar lingo, we’ve listed out a few of the most basic real estate terms with clear and simple definitions to help you get your bearings:
Appraisal: An estimate of value given by a licensed, professional appraiser. An appraiser uses a variety of factors to determine the value of a home including condition, initial purchase price, sales of comparable homes in the area and financial conditions surrounding the sale. Mortgage lenders require an appraisal when financing is needed to purchase a home.
Binding Agreement: The purchase and sale agreement becomes binding when a buyer and seller have agreed to all the terms, and the complete signed agreement has been delivered to both parties. The date of delivery is called the binding agreement date, and the timeframe for all contingencies contained in the agreement begins the day after this date.
Closing: The completion of a real estate transaction where the seller delivers title to the buyer in exchange for payment of the contract sales price. In Georgia, the buyer and seller usually attend the closing at the same time and sign the paperwork together.
Closing Costs: Expenses that must be paid in addition to the purchase price of the home (for the buyer) or are deducted from the proceeds of the sale (for the seller.) Typical buyer-paid closing costs include loan fees, prorated property taxes, title insurance, attorney fees and municipal recording fees.
Closing Disclosure: A document given to buyers who are financing the purchase of their home. The CD provides a detailed description of loan terms and discloses all fees and costs associated with closing. Mortgage lenders are required by law to provide the CD to the buyer at least three business days prior to closing.
Contingency: A provision in the purchase and sale agreement requiring completion of certain acts or events before the agreement becomes legally binding. For example, a financing continency is often used when a buyer must obtain a loan to purchase the home.
Due Diligence Period: A period mutually agreed upon in the purchase and sale agreement in which the buyer is given the opportunity to conduct a home inspection and investigate any other information about the property or neighborhood they feel is important. A buyer may terminate the purchase and sale agreement without penalty at any time before the expiration of the due diligence period.
Earnest Money: Money paid by the buyer as a sign of good faith or intention to complete the sale of a property. Earnest money is collected after an offer is accepted and the purchase and sale agreement becomes binding. The money is held in a special account by the buyer’s broker until closing when it is then transferred to the closing attorney and applied toward the buyer’s closing costs and/or down payment. The amount of earnest money is negotiable between the buyer and seller, and is returned to the buyer if they choose to terminate the agreement during the due diligence period.
Settlement Statement: A detailed accounting of a real estate transaction prepared by the closing attorney. The settlement statement provides an itemized list of how the costs and fees associated with the transaction are allocated between the buyer and the seller.
Special Stipulations: Specific instructions added to the purchase and sale agreement outlining actions or requirements not previously addressed in the agreement. Examples include language asking the seller to pay for or transfer an existing a termite bond, the inclusion of a home warranty or language ensuring the property is thoroughly cleaned before the buyer takes possession.
Warranty Deed: A document used to legally transfer property and pass ownership from one party to another. A warranty deed usually includes a legal description of the property, the name of the person transferring the property and the name of the person taking ownership of the property.
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