Buying or selling a home has many fast-moving parts. Even seasoned home buyers can find the process to be daunting. Knowing basic real estate vocabulary and jargon can greatly aid your journey. Here is a list of some of the most questioned terms to reference as you move forward:
A contingency is a condition that must be met for a contract to be valid and binding. In the case of a real estate offer, a contingency may include many things that could possibly happen to prevent the sale from closing. Some buyers will make their offer contingent upon the sale of their own home. In this case, the buyer could back out of the deal if their home never sold. There would be no repercussion for backing out of the deal. There are many ways a contingency clause may be used. Offers can be subject to certain closing dates. Buyers sometimes limit their offer to their ability to obtain a favorable mortgage rate. When the property value is uncertain, a definite appraised value may be stipulated. Accepting an offer with a contingency clause can be a good way to obtain a sale. Make sure that both parties can live with the outcome should the contingency come into play.
Sale pending (or “offer pending”) simply means that a buyer has submitted an offer and the seller has accepted it. In other words, this isn’t the sort of situation where you can simply opt to outbid all the other buyers – it’s already past that point.
Think of this as your official statement of interest in buying a home. This is the money the buyer puts down when they have a serious intent for purchasing a home. If the buyer pulls out of the deal after the financing and appraisal deadlines are met, the seller keeps the earnest money. This helps keep everyone committed and honest. This money goes toward your purchase of the home in the end, but until that point, it is held in escrow.
Escrow is a service provided by a third party to hold funds until the buyer's agent and seller's agent have fulfilled each portion of their contract. Escrow companies may be hired by either the buyer's broker or the seller's broker, however, the most common arrangement is that the seller's broker will make the decision to choose an escrow company.
For the home buyer, the real estate closing is the final step into homeownership. There are usually many documents to sign, depending on the type of mortgage. The closing agent will explain each document prior to signing and issue a copy to the buyer. The closing statement will be explained in detail so that no amount should go unaccounted for in the deal. This is the day that all money is due and payable in a cashier's check, in most cases. For the seller, the closing is payday. There are not as many documents for the seller to sign.
A disclosure statement is a document provided by the seller of a property that details negative aspects of the property that the seller is aware of. Leaks in the ceilings, plumbing issues, insect infestations, and any other issues the seller knows about should be included in a disclosure statement. Any repair or remodeling work done by the seller should also be disclosed, including any applicable permits required for the work. Disclosure statements provide a potential buyer with information relevant to the buyer's decision to go ahead with a purchase. Regulations for disclosures vary from state to state, with some states imposing more stringent requirements; and, in all states, by federal law, sellers must disclose the presence of lead-based paint hazards in buildings constructed before 1978.
A home inspection is completed by a third-party, licensed home inspector, on behalf of the potential buyer after they have an accepted offer. The purpose is to check that the house’s plumbing, foundation, appliances, and other features are up to code and functioning properly. Issues that may turn up during an inspection may factor into the negotiation on a final price. Failing to do an inspection may result in surprise costly repairs down the road for the home buyer.
Real estate agent/Real estate broker
A real estate agent is a professional with a real estate license who assists both buyers and sellers in the home-buying process. In the state of Indiana, there is only one license, and that is a Broker's license. Thus, all agents are Brokers. A Managing Broker is a designation rather than a separate license. Eligibility is determined by the Broker being licensed for two years under a Managing Broker.
A Realtor is a real estate agent who specifically is a member of the National Association of Realtors. NAR has a code of standards and ethics that members must adhere to.
Real Estate has its own lingo just as any other industry. Still, have more questions? Reach out to a CENTURY 21 Scheetz agent today to understand the whole process of buying or selling your home.