The home buying process is complicated and confusing enough as it is already, then there are times when your team of real estate professionals talks shop and it just gets more difficult to follow their conversation. Don’t worry we have just the thing for you!
Familiarizing yourself with these common terminologies in all real estate transactions would help you follow their conversations faster and understand your situation and where you are in the home buying process.
Multiple Listing Service (MLS)
You would hear MLS a lot from realtors but they never actually tell you what it is. The MLS is basically a database shared by real estate brokers that provide information on homes and properties that are for sale. It’s the best tool and way to know what other properties are available and get an idea of the neighborhood and costs.
Comparative Market Analysis (CMA)
CMAs provided data and compare properties that have recently sold or are currently listed. It helps price properties accurately keeping the market competitive.
More commonly known as comps is information that your realtor prepares on properties that have sold in the area similar to what you are looking to buy. It typically contains details such as selling price, square footage, number of beds and baths, and recent work done on the property to name a few. Leveraging this information can help you decide on your offer and increase the chances of it getting accepted.
Closing costs are expenses that are not factored into the selling price. These are costs for expenses that need to be paid after your offer is accepted and before escrow and closing. These costs typically include loan origination fees, appraisal fees, title fees the like. Preparing anywhere between 3-6% of the selling price would be ideal to cover all closing costs.
A blind Offer is an offer made on properties for sale wherein the buyer has not seen the property, thus the name. A real estate professional would highly discourage it but this depends on the buyer’s discretion. Usually done when the market is hyper-competitive or if the buyer really wants the property.
Cash Reserves are money required by lenders that are earmarked for mortgage payments. Not all lenders require this, but some approval of the loan is contingent on having cash reserves. The amount is usually expressed in the number of monthly mortgage payments multiplied by a certain number of months, typically anywhere between 2-6 months.
Liens are legal claim, hold, and rights on a property that was used as collateral wherein the debtor failed to meet payments. The property is used as security to collect a debt. Buyers typically veer away from purchasing homes with liens on them as this can create certain complications down the road. Some buyers still proceed with an offer but opt to include any outstanding liens in their contingencies.
Escrow generally means a temporary hold, in real estate transactions, escrows typically happen when the seller has accepted an offer but the buyer won’t close until all obligations are met. More often than not it relates to certain repairs that need to be done on the home. Once these conditions are met, they will be able to release the property from escrow and close on the sale.
Contingencies are stipulations and conditions in contracts that need to be fulfilled. The buyer presents these contingencies in the offer and both the seller and the buyer have to agree to these conditions before it is put in the contract. The sale would not be able to close unless these contingencies are met. Common contingencies in home buying transactions are home inspections, homeowners insurance, and required repairs.
Property disclosures are typically required in real estate transactions. The seller has the responsibility to disclose flaws and issues with the property. Typically provided by the seller to the buyer after the offer has been accepted and can typically lead to contingencies before closing. Disclosures should include health hazards, water, and mold damage, repairs, and death in the property.
The Bottom Line
The best way to ensure that you get the home that you want is to get the best support system possible do your research. Reading up on what to expect and brushing up on real estate terms in the buying process would help you get one step closer to your dream home.