26 Real Estate Terms You Need to Know Before Buying a House
Real estate has its own share of lingo and some of it is hard to understand. Build your home buyer vocab before you start looking for your dream home.
Before you start spending your weekends going to open houses, its essential to secure a lender, typically a bank or a credit union, and obtain pre-approval for a loan. After all, you don't want to fall in love with your dream home only to find out you can't afford it. "Lenders require lots of documentation to provide a pre-approval. It is always best to provide that first so there are no delays when you find the perfect home," says Veronica Sniscak, realtor and partner at Bob Lucido Team of Keller Williams Integrity.
Shopping for a home can be a daunting process without the assistance of a buyer's agent; this is your agent who exclusively represents you. "In most cases, there is little to no cost to work with a buyer's agent," says Sniscak. (Typically the agent is paid via the seller.) "Buyer's agents will help you navigate the home buying process and negotiate the best price and terms," says Sniscak. Find out the 15 questions you must ask before buying your first home.
A buyer's agent works with the listing agent, a realtor who represents the sellers of a property. Their role is to work solely to represent the best interest of the person(s) selling the property. "Listing agents are responsible for marketing the listing and negotiating the best price and terms for the sellers. The listing agent is also responsible for negotiating the commission paid to both listing agent and buyer's agent," says Sniscak. Beware of these secrets your real estate agent isn't telling you.
Using a dual agent is akin to using the same attorney for both spouses in a divorce. It may not be in your best interest and in some states dual agents are restricted or illegal."A dual agent represents both the buyer and the seller in the transaction. This can arise if a buyer calls the selling agent of the home. The agent is obligated to disclose the relationship to both parties as this can cause a conflict of interest," says Michael Trickey, CPA, and author of Finding Home: Everything You Need to Know-and Do-For Home Buying Success.
Real estate attorney
It's fairly common that a title company or closing agent oversees things like the purchase agreement and closing documents, but a real estate attorney may give you more peace of mind. "They can help you understand the purchase agreement, prepare and process your legal documents, review closing documents prior to you signing them, and ensure you receive a valid registered ownership of your home," says Trickey. Real estate agents warn against these mistakes you're making with your home.
Real estate broker
You'll likely interact with the realtor but the real estate broker is the person who runs the business where your realtor is based. "Brokers manage or own the business and are involved in all aspects of running the business. You may or may not meet the broker, as most of your interactions will be with your real estate agent who works for the broker," says Trickey.
Land is divided into zones for purposes such as residential, commercial, and industrial. If you plan on running a business from your home, be certain you can do so before buying the house. "Check the zoning laws and any HOA rules in the area in which you are considering," recommends Trickey. "You need to make sure you are allowed to conduct the business activities you are contemplating. Laws and rules vary by locale, so be thorough in your review."
Your dream home may include a shared driveway, private road, or a portion of property that a local utility must access to maintain elements on poles or buried underground. "When someone is granted an easement, they are granted the legal right to use the property, but the legal title to the land itself remains with the owner of the land," says Trickey.
"When a homeowner fails to make scheduled payments of principal and interest on their mortgage loan, the loan is said to be in default. The lender, in order to recover the money it advanced, initiates a legal process called foreclosure. Through the foreclosure process, the lender gains ownership of the defaulting borrower's home," says Trickey. A lower price tag is especially appealing to DIYers but may need a lot of work to be livable. Hire a professional inspector to examine the home and keep in mind the sale may take several weeks or even months to close. These DIY home improvement fails will make you cringe!
When you're ready to make an offer on your dream home, your realtor will write the offer, outlining the price and terms you wish to offer. Hopefully, the seller accepts the offer but it can be rejected or tossed back to you with a counter-offer. "Once all details are agreed by both parties and signed you have a fully ratified contract," says Sniscak.