There is an average of nine different service providers involved in a Quincy home purchase. Each of these professionals is well versed in real estate lingo. Why shouldn’t you be, also. Buyers who become familiar with basic real estate terms will have less stress during their home purchase. Understanding what is being discussed between these service providers will help prepare you for each step of the process and will help you make decisions about the home buying process with confidence.
Take a look below at some of the basic terms you’ll hear when discussing a home purchase. Refer to this list often when interviewing buyer’s agents, meeting with loan officers, and hiring other service providers such as home inspectors, insurance officers and repairmen.
Buyer’s Agent: A real estate agent who is trained to work specifically with people who are buying a home. Buyer’s agents have taken special courses in learning how to best represent, advise, and manage transactions on behalf of buyers.
Mortgage: The loan a buyer takes out to purchase the home.
Loan Officer: The professional that works for the bank or lending institution who assists buyers in acquiring a mortgage loan.
Pre-approval: The process the buyer goes through with the loan officer to determine if the buyer is eligible for a mortgage loan.
FHA Loan: A federally backed home mortgage program which requires a small down payment from the buyer’s funds, as well other criteria which must be met.
Conventional Loan: A non-federally backed loan. These loans are funded privately, through lending banks, and guidelines vary.
Showing: When the buyer’s agent schedules homes to show to their home buying client. Either the home buyer or the buyer’s agent may select the homes to see.
Multiple Listing Service (MLS): A professional database that brokers use to “list” the homes they have for sale so that other agents, and buyers, may know they are available for purchase. The MLS is the source from which most all other internet websites that advertise homes for sale acquire their data.
Comparative Market Analysis (CMA): A report that an agent runs in the MLS to learn the sales history of an area or a type of home when a client is interested in selling their home or when a buyer considers making an offer to purchase. The data helps the agent and their client determine the fair market value of a home.
Short Sale: When a home is offered for sale contingent on the seller’s bank approving an offer that is for less than what is owed on the home.
Foreclosure/REO: Bank owned property due to the previous owner defaulting on their mortgage.
Offer: An offer for purchase on a home. This is the document that makes the offer to purchase but is not yet signed by both parties. It, therefore, remains an offer at this point.
Contract: When an offer is accepted by the seller, it becomes a contract. This means that the offer has now been signed by both the buyer and the seller.
Deposit: An agreed upon amount by the buyer and seller that the buyer puts down on the home to show good faith in following through with the contract. This money is held by a third party, a broker, a title company, or an attorney, until the contract closes or is canceled for some reason in the contract. Should the contract be canceled by the buyer for no reason in the contract, this money may go to the seller since it was deposited in good faith and the contract was broken.
Closing Date: The date the buyer and seller agree to sign all the necessary documents inclusive of transfer title to the buyer, financial documents, and the HUD-1 Settlement Statement.
HUD-1 Settlement Statement: A closing document that discloses all of the money-in, money-out, debits and credits of both the buyer and seller. This shows the financial aspects of the transaction.
Possession Date: The date the buyer and seller agree to allow the buyer to occupy the home being purchased. Sometimes this date is different than the Closing Date.
Appraisal: A report that the lender requires to prove that the home being purchased is worth the amount that is being loaned to the buyer. The buyer pays for the appraisal and the loan officer orders the appraisal.
Inspection Period: The time frame in which a buyer has to conduct inspections on the home being purchased. Some common inspections are a whole house inspection, a mold inspection, and a pest inspection, although others may be conducted as well. All inspections are generally paid by the buyer.
Unacceptable Conditions: Any item that an inspector finds fault in during the inspections. Although there may be many items found faulty in the eyes of the inspector, it is in the buyer’s best interest to only request the seller fix things that are related to health and safety, such as mechanical and structural problems.
Closing: When all the necessary documents are signed and the transaction is complete.
This list is considered rather basic. Most home purchases will involve all of these items and may include others. It is in your best interest as a buyer to familiarize yourself with the details of a real estate transaction. Your buyer’s agent will help you walk through this maze of confusion, but only you will know when something needs to be addressed due to conditions your agent may not be aware of. It’s not too difficult when you take one step at a time and have enough knowledge to know which questions to ask.
If you are thinking about purchasing in Quincy or the South Shore, please give me a call on 781 929 3683.
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