The following are some terms you may want to familiarize yourself with in order to facilitate an informed process:
After being approved for your loan and the next step would be to write an offer to the desire property, after seller and buyer agreed on the price of the property. Once you have finalized your selection, then next step is to make an offer. Thorough investigation of the property is always advisable to ensure an accurate valuation.
- Appraisal and Inspection: Appraisal companies are the resource utilized in this phase to establish the appropriate value. In general, it is the buyer’s responsibility to pay for the appraisal. Once the appraisal company has completed their analysis, the next step involves inspection of the property by a licensed inspector. A home inspection is a limited, non-invasive examination of the condition of the home. This, too, is something the buyer generally pays for. Any issues that are identified with the property are then negotiated between the buyer and seller as to whether it will be corrected or if the seller will offer the buyer some alternate consideration.
- Budget: Budget is a crucial element of any real estate purchase. Real estate pricing trends in the United States are often unpredictable. It is essential to identify a reasonable budget that is within your means to use as one of your guiding tools. In order to formulate this budget, the following are essential components of your buyer profile: your credit score, your annual income, and your down payment. As a starting point, there are several online mortgage calculators available which can provide you with a broad idea of a mortgage that is within your budget. Keep in mind that this information is simply to offer you a starting point and that a lending professional will help you navigate the details further.
- Closing date: The closing date is set during the negotiation phase, and is usually several weeks after the offer is formally accepted. On the closing date, the ownership of the property is transferred to the buyer. In most jurisdictions, ownership is officially transferred when a deed from the seller is delivered to the buyer.
- Contingency: A provision in a real estate contract that specifies the contract would cease to exist upon the occurrence of a certain event.
- Conveyance: Conveyance is the act of transferring an ownership interest in real property from one party to another. It also refers to the written instrument, such as a deed or lease that transfers legal title of a property from the seller to the buyer.
- Down Payment: Your down payment is a critical component of your purchase decision. There are many factors involved with determining the appropriate down payment amount and the consequences of that decision. These factors are best reviewed with your lender.
- Earnest Money: Down payment or a small part of the purchase price paid by a buyer as evidence of good faith.
- Escrow: Real estate escrow companies often oversee the real estate transaction to ensure a smooth process. In general, an escrow company’s involvement begins when a buyer’s offer is accepted by the seller.
- List Price: This is the seller’s original asking price for the property. Factors used in establishing this price include, but are not limited to, current market conditions and sale price of other comparable homes in the area (also known as a “comp”).
- Pre-approval: Most buyers anticipate borrowing money from a lender in order to purchase any property. Before beginning your property search, obtaining pre-approval for your loan is always a good idea. This approval is generally based on your income, credit history, down payment, and debt. Once you are pre-approved, this allows the purchasing process to proceed more smoothly and quickly.
- Property Mortgage: Extensive mortgage options are available to meet a variety of needs and offer consideration to specific populations. Your lender will review these options with you. However, it is always a good idea to shop around for the best rate.
- Real Estate Agent: A professional real estate agent can help you navigate the home buying process more efficiently. Some factors to consider when identifying an appropriate agent include: experience, sales volume, and the agent’s ability to understand your specific needs.
- Real Estate Purchase Agreement: This document is the written legal contract used between a buyer and seller to reach agreement on all the terms of a real estate purchase. The document includes details such as purchase price, duration of escrow, and loan amount.
- Residential Property Disclosure Form: This document is prepared by the seller to identify any known defects or disclosures regarding the property.
- Title: Title is a legal term for the rights to a piece of real estate that may be owned. There are a variety of rights on a property’s title that can be owned, either by one party or by multiple parties. In a real estate transaction, a title examination is done by searching the public records at the county recorder's office. The history of sales of the property, mortgages against the property and outstanding liens like property taxes are discovered. In order to sell the property with a clear title, the seller must take actions to remove the items found on title that will impair the buyer's use, ownership or enjoyment of the property.
- Title Company: The title company is involved in examining and ensuring title claims for real estate purposes. The company verifies ownership of real property and determines the valid owner through an examination of property records in a Title search.