Are you ready to make the biggest decision of your life?
Getting married? Choosing a university and career path? Nope, buying a home is one of the biggest decisions you’re likely to make, both financially and emotionally.
As exciting as buying a home is, the process can be complex and confusing. Real estate terminology can be like a foreign language. If you don’t understand it, it can be overwhelming, but once you’re familiar with the terms, it will all fall into place.
If you’re looking to purchase a home, we can help. Read on to learn some of the most common real estate terms, what they mean, and why they’re important for you to know.
3D tours are a great way to virtually tour a prospective property. True 3D tours are created using state of the art technology to scan each room so that you can virtually tour the home on line. You can move through the space as you wish, look up, down and all around at your own pace any time that you want. Sometimes, travel and distance can make it tough to tour multiple properties, so take a tour from the comfort of your own home.
3D tours can have much more impact than photos alone, as they give you a better scope of the size, look, and feel for the property. If you can’t visit in person, a 3D tour is the next best thing.
An adjustable-rate, or variable-rate mortgage, is a mortgage with a fixed rate for only a set period of time. After that time, the rate will fluctuate, yearly or monthly, in accordance with market changes.
Make sure you completely understand the conditions of your mortgage before accepting, as your interest rate may increase over time, something you’ll want to be prepared for.
Appreciation is the financial value of your house as it increases over time. Most homes appreciate over time, meaning they are worth more. This is what makes real estate such a popular investment strategy.
However, in some cases, the opposite may happen. This is called depreciation, meaning your property has gone down in value.
A real estate broker is someone who has passed their broker’s exam, meaning they are well-versed in real estate law. Real estate agents work under the supervision of professional brokers.
Although the word broker and agent are often used interchangeably, they are slightly different roles.
Closing is another word for settlement when the home is legally transferred over from one party to another. There is usually a cooling-off period, often about six weeks, before the closing. This gives both parties time to reconsider, should they wish.
At closing, both parties will sign documentation and the deed to the property is handed over to the new owners. Once complete, the sale is now final.
The commission is the percentage of the sale of the home that goes to the real estate agent after the sale has been closed.
The commission percentage should always be confirmed via a signed contract by both parties before the property is listed by the agency as for sale. While the commission is an important consideration, it shouldn't be the main factor when selecting a realtor. Look for someone who is professional, knows the local area well, and is trustworthy.
The down payment is your deposit, or savings, paid towards the property, with the remainder of the purchase price coming from your loan. The amount of down payment needed will vary, but planning for at least 20% of the purchase price is a good starting point.
The higher your deposit, the lower your monthly mortgage will be, so taking the time to build up a solid down payment is recommended.
The term eminent domain is something all home buyers should know. In cases of eminent domain, the government has the right to take your property, for a fair purchase price, if it’s for the greater public good.
This may mean the land is needed to build new highways, schools, or municipal buildings. While it seems unfair to the homeowner, US federal, state, and local governments are all legally entitled to invoke eminent domain if it is declared to be in the public interest.
If a homeowner fails to make mortgage payments for a set period of time or doesn’t discuss their hardships with the bank, then foreclosure might occur. This is the legal process in which the property transfers ownership, generally to the bank who provided the mortgage. It is the last resort and is the process in which legal ownership of the property is taken from the homeowner, due to failure to make repayments.
Homes that are foreclosed may then be sold by the bank at auction, as a cost recovery.
An heir is someone who legally inherits land or real estate. This is generally a result of the property being gifted to the heir within a will. If a loved one has left you their home in their will, this would make you the heir.
If you’re selling a home, you want it to look as good as it can, to impress buyers. Instead of leaving a home empty, making it hard to imagine how it would look as a cozy home, many sellers use home staging to increase the home’s attraction.
Home stagers bring in furniture, art, decor, and interior design, making the home look beautiful, lived-in, and appealing. The cost to hire home stagers is a strong investment, as the more inviting your property looks, the higher it will sell for.
Home sellers today also have the option of virtual home staging. Images of the empty home are edited by talented designers who add furniture and accessories to create a very realistic view of the home fully furnished. This option is much less expensive and quicker than physical home staging and looks beautiful!
A homeowners association, also known as an HOA, is the governing committee that manages the common areas of a building or neighborhood. This includes things like swimming pools, entryways, garbage pick-up, and stairways.
Before buying into a new neighborhood, always read up on the homeowner’s association, so you’re aware of what the monthly or yearly fees will be, which are mandatory for all homeowners to pay into.
HOAs also have regulations for building requirements, pets, and outdoor features such as pools, decks, and laundry lines. Generally, any changes to the property will need to be approved beforehand by the association.
In the event that two parties purchase a property together, this is known as a joint tenancy. One party is not allowed to sell their product without the permission of the other tenant. Joint tenants, for example, might be two siblings or two friends who decide to go in together on a property purchase.
Mortgage pre-approval is a conditional offer from a lender or bank, up to a certain amount, Once you have this, you will be aware of how much you are able to borrow, and what price range you can afford.
Pre-approval is generally subject to proof of income, a credit check, and the ability to provide a downpayment. Once you find a property to purchase, you’re likely to get the mortgage faster if you already have pre-approval.
In the context of real estate, the principal is the total amount of money due on your home loan. Your monthly repayments will include both principal and interest payments. Interest rates will vary, depending on the type of mortgage you have, but the principal will decrease over time, as you start to pay off the loan.
Probate is a legal process by which the authenticity of a document is proven to be real. This is often used in the case of wills, which are sometimes contested. Probate is a specific field of law, but not applicable to all home sales.
Properties will often undergo a survey before the sale. This is done by a professional surveyor, who will measure the boundaries, elevation, and size of the land, using geometry.
Surveying is the best way to prevent property border disputes and is the most accurate way to know the true amount of land you’re purchasing. The results of the survey can also be used for calculating land tax rates.
Before making a property purchase, it’s smart to run a title search on the property. Going through public records, you can find out any and all details related to previous sales or incidents involving the property.
A title search is recommended so you have a complete understanding of the property’s history before making the purchase.
Do You Have a Better Understanding of Real Estate Terminology?
Your dream home is out there, just waiting to be found! All the time spent searching, house-hunting, and uncertainty is worth it after you put your feet up and enjoy your first night in your brand new home.
Real estate terminology can seem complex at first, but once you take the time to understand it all, it should seem more natural. If you’re interested in the real estate market, as a seller or buyer, contact us for expert and friendly help.