Whether you are buying a home in the same city or you need to move to an entirely new part of the country, the purchase of a house can be an overwhelming process. Not only do you need to worry about the financial elements of this purchase, but you will also need to ensure the home you are buying is a smart move for you and your family's needs. To ensure you understand the buying process, understanding confusing phrases is best. Before you begin your home search, here are a few essential real estate phrases you should become familiar with.
When you find a home that interests you, you and your agent can work together to write the seller an offer. In this offer, you may need to state some contingencies.
A contingency is an element that ceases the contract if certain issues are not repaired or conditions are not met. For instance, you may have a home that needs to sell before you can close on your new home. This would be documented as a contingency in your offer. If you are unable to sell your current home for some reason, you will not be contractually obligated to purchase the new home.
Other contingencies may center around repairs and the home inspection, the appraisal and home value, final walk-through of the home, or an approval for homeowner's insurance.
Another common word that confuses buyers is escrow. Unfortunately, this word also frightens buyers because it involves additional money. However, this additional money that is placed in an escrow account is used to pay important fees that are required.
Homeowner's insurance, association dues, and property taxes, which are prorated depending on the time you close on your home, are placed in your escrow account. These funds are dispersed to the correct account holders at the time of closing. This reduces any stress and worry you will feel once you close and move into your home.
Of course, an escrow account is also required by your lender. Since your lender needs to protect the value of the home, collecting the escrow to pay these fees is necessary.
Buying a home is a large investment, so you want to make sure you are making a smart decision. Thankfully, you have a right to investigate the property's condition and value in a truly detailed manner before closing. This period of time is known as a due diligence.
The due diligence period may take place before making an actual offer or after your offer is accepted by the seller. If any issues are noted during the home inspection or defects are found while researching the neighborhood and adjoining properties, you have the right to back out of the contract.
To ensure you perform the right research during the due diligence period, use the following tips:
Understanding the buying process is key before you start looking at homes. These important terms will help you buy a home in a smart, stress-free manner. Speak with local real estate brokers to learn more.