Confused about some of the terms being used when checking out homes? Use our Real Estate Glossary to help find the definitions of some of the terms, jargon and lingo you're bound to come across!
A type of fee that a buyer pays to the mortgage lender in order to reduce the interest rate on the loan. Buying a point costs 1% of the total loan. So, if the total loan amount were $500,000, each point would cost $5,000. Also, each point usually lowers the interest rate by 0.25%, though this varies according to the lender, and the nature of the loan. So, if the rate of interest on the loan is 4.5%, and you buy 2 mortgage points by paying $10,000, your new interest rate becomes 4%. Buying a point can have a huge impact on your lifetime savings on the home. If you plan on staying in the house for a long period of time and have the additional funds to buy mortgage points after paying the downpayment and closing costs, it makes sense to consider them.
An inspection of the sewer line from the house to the main sewer line, done by a professional. The professional will use a special camera that is attached to the end of a hose, and run it along the entire line, getting images and videos on the condition of the sewer line. It is very useful to get a sewer scope done before buying a house because a sewer line is one of the most expensive repairs in a home. On average, a sewer scope can cost anywhere between $100-$300 but can save thousands if you avoid buying a house that will need a sewer line replacement...
A property that is owned by a lender/financial institution after it failed to sell in a foreclosure auction is known as Real Estate Owned (REO). Such properties are then usually sold by the bank/lender through a real estate agent, or by directly listing them on the bank website. REO properties tend to sell for an amount that is lower than the market value, as they are often sold as-is, and need considerable repair.
When someone dies without a will, their house is sold by the state in a process governed by the Probate Code through what is called a probate sale. Usually, an estate representative is appointed by the court, who in turn engages the help of a real estate agent. An appraiser helps to set the listing price of the home. Once a buyer makes an offer, a court appointment is set where bidding takes place. The highest bid wins, and the winner must give a cashier’s check for at least 10% of the sale price. The homes in probate sell for much lower than the market value but also come along with a lot of disadvantages. For one, the buyer gets the home as-is and has no idea about the hidden cost of repairs. Also, the process is really long, and can sometimes take up to a year, after winning the bid, before they obtain possession of the property.
"Tenancy in Common (TIC) refers to a type of ownership where two or more people own a piece of real estate, with equal rights to use the entire property. While the interest in the property can be divided into unequal shares (e.g., A owns 25%, B owns 25%, and C owns 50%), no single owner can claim a complete right over a particular section of the property. Instead, the TIC agreement will grant use rights for specific portions or sections of the property to specific interest holders and layout how the expenses for the property, include taxes, will be shared. Each of these interests has its own separate title, which can be conveyed separately from the other tenants in common. TICs also don’t have a right of survivorship, i.e. if a tenant-in-common dies, the property does not get equally divided amongst the remaining tenants-in-common. Instead, it is passed on to the estate of the deceased, or as laid out in their will.
Damage to wood structures caused by a type of naturally-occurring fungus that fosters due to damp timber. Pest inspections will look for indications of dry rot and identify them for remediation. Since dry rot can structurally damage a home, a seller can lose a significant amount of potential sale value if their home is seriously afflicted and opt not to make repairs.
"This is a test to check the level of radon (a colorless, odorless gas that is a byproduct of underground decaying elements such as uranium and thorium) in a home for sale. Usually, radon enters homes through the basement, cracks in concrete, pipe gaps, and floor joints, and inhaling the gas can increase the risk of lung cancer. Mostly, buyers get a radon test done by a certified professional and if levels are higher than the permitted limit, they can ask the seller to install a radon mitigation system."
Once all buyer/seller contingencies are met, a home moves to a Pending Sale stage. Such a home is no longer considered to be an active listing and remains in such a state till all legal paperwork is completed. This is the final stage of sale, after the completion of which, the home is sold/bought.
When the seller accepts an offer on a house, but the deal is dependent on some contingencies or clauses that the buyer or seller needs to fulfil, the house is listed as contingent. A contingent property does not mean that the sale is final, and the home is off the the market. It just means that if the conditions or clauses in the sale contract are met, the home would move to a sale pending stage.
For Sale By Owner (FSBO) refers to a method of selling a house, where the owner sells the property without the involvement of a broker or a real estate agent. Owners typically use the FSBO method to avoid paying a selling agent commission on the real estate transaction. However, it also means that the seller is responsible for completing all the work involved in the sale of the house. FSBO sellers must still negotiate the amount of compensation the buyer's agent would receive, either as a commission, fee-for-service, or a flat amount.
"When a house is bought or sold, or undergoes new construction, a supplemental assessment is made for the value of the house. This accounts for a change in the prior owner’s taxable value to the actual market value of the house when it is bought. This adjustment to the house’s taxable value is a one-time assessment and usually results in an increase in the value. Significant new construction such as a room addition, remodeling the basement, building a patio, or adding a pool, are all examples of changes to a house that can result in a supplemental assessment to its taxable value. Regular maintenance and repairs to a house do not result in such an assessment."
"A real estate agent or professional who is a member of the National Association of Realtors (NAR) and subscribes to its code of ethics. Realtors are experts in their field and are licensed to use the realtor trademark as part of their name. However, a realtor is not the same as a real estate agent. Any industry professional that helps facilitate the sale or purchase of a house in return for a commission is a real estate agent. If that agent is a registered member of NAR, they become a Realtor. Any agent, salesperson, property manager, or appraiser, that becomes a member of the NAR can use the Realtor trademark against their name. Realtors must abide by the code of ethics, and uphold the standards of the NAR."
"When a homeowner does certain types of repair or remodeling work on their property, they must seek a building/plumbing/electrical permit for the work. This is an official approval from the local government agency that allows the owner or the contractor to undertake a construction/remodeling/restructuring work on the property. The local body checks that the suggested plan complies with the local standards for things such as use of land, zoning, and construction. Every county keeps a record of the permit history of each house. It can give a view of previous repairs and improvements to the property, as well as bring up areas of possible concern. If there seems to be a discrepancy in the permit history according to the county records and those on the listing for the home for sale, it could be that unpermitted work has been completed at the property."
A real estate appraisal is an estimate of the market value of a property (residential or otherwise) for sale, assessment, or taxation.
Short for Homeowners’ Association, an HOA is an organization or elected group that make regulations, collect fees, and enforce rules for a planned community, subdivision or condominium.
The price that the seller is willing to accept for selling the house without countering for a higher price. This means that if a home is listed for $1.5m, the seller will sell it at this price rather than countering at $1.6m or more.
An opinion of what a property could sell for based on factors such as the current market conditions, demand and supply, the property features, and the sale price of comparable properties. Usually, the market value of a home is always more in the eyes of the seller than that of the buyer.
A multiple listing service (MLS) is a database or repository of properties that are available for sale. Established by cooperating real estate brokers and agents, MLS has the most relaible and comprehensive data available for those looking to buy or sell a home. Brokers can use this system to look at one another's listings and connect home buyers to sellers.
A contingency is a clause/condition in the sale agreement that must be met in order for the real estate transaction to be completed. If the contingencies in the contract are not met, the contract becomes void.
A Closing Disclosure (CD) is a a form that lists the final details of your mortgage loan including the loan terms, monthly interest payments, additional fee and more. The lender provides the CD to the homebuyer at least 3 days prior to closing the loan as a final document containing the actual details.
Comparable Properties or Comps refer to recently sold properties than can be used to determine the value of similar available properties. It helps a seller/buyer determine the fair value of the home they are selling/buying based on other homes with similar characteristics that were sold recently.
In simple terms, Close of Escrow (COE) is the transfer of home ownership from the seller to the buyer. It is the completion of the real estate transaction and marks the final sale of the home.
A real estate professional who assists the agent in by managing all the administrative tasks required in a real estate transaction. From opening escrow, to managing paperwork, to meeting deadlines, and closing the contract, a TC or transaction coordinator performs all the administrative duties.
A Mother-in-law unit is similar to an accessory dwelling unit except that it is attached to the main single-family home. A basement apartment is the perfect example of a MIL unit. A mother-in-law suite comes with an attached bathroom and can also sometimes have a separate entry, a small kitchen and a living area.
An accessory dwelling unit (ADU) is a secondary dwelling unit on the same grounds as your primary single-family house. It could be in the form of a a small cottage in the backyard, or an apartment over the garage. It is important to note that an ADU cannot be sold separately like a condominium. The owner of the home and ADU is the same and it is part of the same property as the main home.
Selling a home as-is means that the seller will sell the home in its current condition, and will make no changes or improvements to the home before the sale. Usually, a home is sold as-is when the seller can't afford to fix the flaws before the sale, or the home has gone through foreclosure and is now in possession of the lender.
Renegotiating your existing mortgage loan, or paying off your existing loan by taking on a new loan. Typically, homeowners refinance mortgage loans to take advantage of lower interest rates, or to shorten the term of their mortgage.
The fee that buyers and sellers pay, over and above the price of the property, to complete a real estate transaction. These include costs such as credit check fee, insurance, real estate commission, taxes, and appraisal fee.
A mortgage where the interest rate does not change over the lifetime of the loan. This makes budgeting easier for homeowners who want to have a predictable payment month on month.
It is the value assigned to a home by the municipality in order to assess property taxes. This takes into consideration the sale price of comparable homes, square feet area, home features and inspections. Typically, the assessed value is lower than the market value of the property.
A legal process that allows lenders to take ownership of the mortgaged property if the buyers defaults on the loan. The lender can exercise the right to sell the property to recover the loan amount.
A document detailing how much loan a lender will be willing to give to a potential home buyer after evaluating their credit history. SP: This is a document you'd get from a lender if you are interested in buying a home. It indicates they have pre-approved you for a loan up to a specific dollar amount (for instance, up to $600,000) based on two things: how much money you make and your credit score. The process to get a pre-approval letter can be quite quick. A buyer provides the pre-approval letter alongside an offer they make on a house. Once your offer is accepted, there is a vigorous underwriting process by which a lender makes a final decision on the loan amount and interest rate they can offer to you.
Escrow refers to a neutral third party that handles the property transaction, funds, and other related documents during the sale of a home, and ensures that the change of ownership is properly recorded in the public records. Being "in escrow" refers the period of time when funds are being held by the third party account before the final transfer to the seller. This gives the buyer time to perform due diligence on the property while also allowing the seller the confidence that once the due diligence is completed, the buyer has sufficient funds to close the deal.
Private mortgage insurance (PMI) is a type of insurance that you might be required to buy as a condition of a conventional mortgage loan. Most lenders require PMI when a homebuyer makes a down payment of less than 20% of the home's purchase price. PMI costs can range from 0.25% to 2% of your loan balance per year, depending on the size of the down payment and mortgage, the loan term, and the borrower's credit score.
Sellers are required by law to disclose any and all flaws in the home, that the sellers or their agents are aware of, to the buyer.
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