5 Real Estate Terms You Need to Know
Real estate can be confusing at first, largely due to the many different terms and phrases you have to know and understand. To make it a little easier to grasp, here’s a simple explanation of five common real estate terms.
A pre-approval letter is a statement from the bank that basically estimates how much money they’re willing to loan to a particular buyer. This is extremely helpful to the buyer because it gives them a much clearer idea of what kind of home they can realistically afford.
An appraisal attempts to determine an accurate market value for a property by examining both the actual property and comparable homes that have recently been sold in the area. This process is done by an licensed appraiser and is done for the sake of the bank, who wants to ensure that it is not investing in a property that is overpriced within its market.
Closing costs are a group of expenses that you’ll incur at the end of your home buying process including loan processing costs, title insurance, and excise tax. These costs usually amount to about 2-5% of the total purchase price of the property, but it is possible to negotiate some of the costs down.
Title insurance ensures that the seller of the home actually has the right to sell it! Title insurers also search public records to make sure there are no liens on the home,such as unpaid taxes or contracting bills.
The escrow process while buying a home involves a neutral third party overseeing the process from the deal being signed to the property being officially transferred. The home is held “in escrow” to ensure that both parties are meeting their responsibilities during the deal and satisfying all of the conditions in the contracts.