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Buying your first home can be exciting because you'll be realising one of your biggest dreams. The buying process can also be daunting and requires patience because it involves several processes. You'll encounter many terminologies used along the way, which can heighten your anxiety if you don't know their meaning.
To be empowered and be in stride with your agent, here's a list of the commonly used vocabulary in real estate that you need to know when buying a home.
An active listing on a home means the house is available and open for sale and that no offer has been formally accepted.
2. Under contract
A house listing under contract means you've shown interest in a house and the seller has accepted your offer. Terms and conditions of buying the home are usually captured in a legally binding written contract that you and the seller sign. However, signing the contract doesn't mean that the sale of the house has been finalised. The seller can still accept other offers in case the transaction falls through.
A property is said to have appreciated when its value increases more than the investment. The value of a property will appreciate due to external economic reasons and not because you made improvements to it. A home's value can increase due to an increase in demand or a change in interest or inflation rates.
Assessment refers to the value placed on your home that's then used to determine the amount of taxes you'll pay.
5. Back on market
This term refers to homes that were once on the market, then went off the market, and are back on the market again. A home can be back on the market for various reasons such as whether the home inspection had a problem, the buyer's mortgage wasn't approved, or the seller failed to disclose pertinent facts like a death that occurred in the house.
6. Comparative market analysis
Also known as competitive market analysis, it's a term used in real estate to refer to the analysis done to determine the price of a house based on the market value of similar recently sold homes in the same area.
7. Closing costs
This refers to the extra costs you'll pay on top of the home purchase price that's associated with home purchasing processes. They include transfer taxes, attorney's fees, title insurance, and others.
A contingency provision in the sales contract states that a specific condition must be met in order for the sale to close. For instance, a clause in the contract can specify that the contract is contingent upon the buyer getting the homeowner's insurance.
A deed is a legal document signed and delivered at closing that shows you're the current registered owner of a property.
10. Down payment
This is the amount you'll pay upfront towards purchasing a house, which is usually 20 per cent of the purchase price. The down payment is money you've saved and isn't part of the mortgage. A lender will finance 80 per cent of the total home purchase price in this instance.
An escrow is a non-partisan third party hired to handle the transfer of documents and money between you as the home buying party and the seller. The escrow will only release the documents or money when certain conditions have been fulfilled.
Equity, also known as the owner's interest, refers to the portion of the home's value attributed to the buyer rather than the lender. In other words, it's the difference between the property's worth and the amount owing on your mortgage.
13. Home inspection
Home inspection is usually done before finalising a home buying transaction and entails an assessment of the home from the roof to the foundation. A qualified home inspector will assess the condition of a home, including its electrical work, plumbing, HVAC system, structural foundation, and other things.
A lien in real estate refers to a claim on a property due to debt and can only be satisfied by paying the debt. A lien can be voluntary or involuntary.
15. Title insurance
Title insurance will protect you from title defects or other ownership problems of the property you buy. Some of the issues that may arise after you close are unsettled property taxes, forgery of paperwork, or claims of ownership by third parties.
Even though it'd be to your advantage to know the real estate terminologies, knowing them all by heart can be overwhelming. If you aren't sure about anything along the way, just ask your real estate agent who'll help you understand.