Whether you’re planning to buy or sell a home, you’re likely to be confronted with a lot of jargon. There are certain terms that are widely used in the real estate industry that have the potential to confuse and intimidate. To help you navigate your way through the world of property transactions, here are eight common words and phrases that you should familiarise yourself with.
1. Cash buyer
In most cases, people go to traditional realtors when they wish to sell their homes. However, in certain scenarios, it makes more sense for property owners to approach a cash buyer instead. These companies make instant cash offers on properties, and they buy homes in any condition. For example, cash sale specialists Fast Sale Florida buy homes regardless of their state of repair and can complete the transaction in as little as a week. Approaching a cash buyer may make sense for you if you need to sell your property quickly or you don’t want to make the repairs required in order to put it on the open market.
A foreclosure is the seizing of a property by a lender after the borrower fails to make their agreed mortgage repayments. It is considered the last option for lenders and is used as a way for these companies to recoup their initial investment of the mortgage. Borrowers should do all they can to avoid this outcome as it has a highly negative impact on their credit rating.
3. Short sale
A short sale can be used as an alternative to foreclosure. It enables you to sell your home for less than you owe on it. This option may be open to you if you’re in financial hardship, but your lender will need to agree to it. Unlike foreclosures, short sales are initiated by homeowners. If a lender agrees to a short sale, the buyer will negotiate with the homeowner first and then seek approval on their intended purchase from the lender. Short sales are less damaging to people’s credit ratings than foreclosures.
If you’re buying a home and require a mortgage in order to do so, your lender will require an appraisal to be carried out. This process involves a licensed appraiser estimating the value of the property based on comparable homes that have been sold recently in the same location, as well as an investigation of the house or apartment itself.
5. Closing costs
Whether you’re buying or selling, you will need to budget for closing costs at the conclusion of the transaction. These are the fees and expenses associated with the sale and purchase of a property and they can include taxes, lender fees, appraisal fees and title insurance. Typically, these costs equate to between two and five percent of the purchase price. However, it’s worth noting that if you sell your home to a cash buyer rather than on the open market, you will avoid these costs.
Commission simply refers to the fee you will be charged by a real estate agent if you use their services. In many cases, the seller covers the cost of the commission to both their own agent and the buyer’s agent.
A contingency is a condition that must be met in order for a sale to progress to closing. When you make an offer on a property, you can specify certain contingencies that must be adhered to in order for the deal to go through. Common examples relate to home appraisal and inspection, as well as financing.
If you are taking out a mortgage in order to buy a property, you will need to get to grips with the meaning of APR. This stands for annual percentage rate and it’s a measure of the cost of borrowing. It acts as a standardised way to indicate borrowing costs over a period of a year and includes the interest rate you will be charged on the loan, as well as other fees and associated costs.
By spending a little time reading up on terms like these, you should feel more confident when you’re buying or selling a home.