Real Estate Vocab: Buyer's Edition
As with any industry, real estate has its own jargon. Here are 10 words and phrases you should know if you're planning to buy a home. Buyer’s Agent – A realtor who works specifically for the buyer, representing the buyer in the transaction. Closing Costs - The fees incurred when you're buying a home. These are finalized at the closing when the title for the property transfers from the seller to the buyer. Examples of these cost include appraisal fees, legal fees, title insurance, property tax, and homeowners insurance. Buyers should expect to pay between 2% and 5% of the total mortgage amount in closing costs. Closing Disclosure - A final statement of mortgage loan terms and closing costs. The buyer must receive this document three business days before closing. Contingencies - Provisions in the purchase agreement that have to be met in order for the purchase of a home to be finalized. For example, there may be contingencies that the loan must be approved or that certain repairs must be made before closing. Down Payment – The amount of money a buyer pays at closing toward the home purchase. Some lenders have a down payment requirement that has to be met, such as 20% of the purchase price. Due Diligence Period - The period of time after signing the contract that the buyer has to inspect the property and decide if they want to move forward with the transaction. Typically, the home inspection takes place during this time. Earnest Money - The money that a buyer puts down when they make an offer on a home to show that they have a serious intent to purchase the home. It is also known as a good faith deposit. It is typically between 1% and 3% of the price of the home, but is negotiable. This money goes toward the purchase of the home in the end, but until that point it is held in escrow.
Home Inspection - An opportunity for the buyer to identify any major issues with the home before the sale is finalized. The inspection is performed by a licensed home inspector who will complete a full inspection of the inside and outsides of the structure including all major systems of the home including HVAC, electrical, and plumbing. See our full post about the difference between a home inspection and an appraisal HERE. Offer/Counter-Offer - A formal offer on the home you want to purchase. The offer is submitted in writing by the buyer's agent, signed by the buyer, and submitted to the seller's agent. The seller could accept the offer, reject the offer, or may make a counter offer in which they accept the offer subject to changes such as the sales price, the removal of certain contingencies, or an amended closing date. When signed by all parties involved in the sale, the offer becomes a legally-binding sales agreement. Under Contract - When the seller has accepted an offer from a buyer, but the sale has not yet been completed.