While few people seem to truly comprehend real estate terminology, it’s an invaluable base of knowledge to have. By understanding major real estate terms, you’ll be able to go about any real estate transaction (whether you’re buying, selling, renting, etc.) with confidence. This isn’t to say that you won’t need an agent, but it can be tough to make smart decisions if you don’t understand the major concepts behind real estate, including basic terminology.
Here are the top must-know real estate terms:
Pre-Approval Letter
Before even starting to look for a home, you should get a pre-approval letter from a local bank, which estimates how much they should lend you. By obtaining a pre-approval letter before starting the home-buying process, you’ll know how much you can afford and will be able to ensure home sellers that you can get a loan when needed with a greater degree of ease.
Listings
Real estate agents colloquially refer to homes for sale as listings, which show information about the home (such as the price and number of bedrooms) on a website. Be sure to refer to sites that show all available homes for sale to make sure you’re able to get a good deal.
Listing Agent vs. Buyer’s Agent
In most cases, there are usually two agents involved when you buy a home: the buyer’s agent, who represents the buyer (go figure), and the listing agent, who represents the home’s seller. Dual agency refers to real estate transactions for which there is only one agent representing both sides of the transaction, and it’s something you should avoid at all costs.
Fixed Rate vs. Adjustable Rate Mortgages
Conventional loan types include adjustable rate and fixed rate mortgages. Adjustable rate mortgages have variable interest rates, and the most common lengths are for 5, 7, and 10 years, while fixed rate mortgages have a predetermined interest rate throughout the life of the loan and usually last for 30 years.
Inspection
Once you’ve made an offer on a home, you’ll want to schedule an inspection, which involves an inspector going through every nook and cranny in the home to look for imperfections/damage that will need to be repaired. This will cost somewhere between $500 and $800, depending on the market. Be sure to get advice from your real estate agent on which local inspectors do the best job- if they find something wrong in the home you’d like to buy, you can negotiate for a reduced price.
Appraisal
Once you’ve applied for a mortgage, your lender will usually require an appraisal of the home you’d like to buy. A licensed appraiser will then estimate the home’s value, based in large part on comparable homes that have sold in the area and an investigation of the property. You might not be approved for a loan if the appraised value is less than the offer you’re making on the home, since the bank doesn’t want to invest in a home that’s overpriced, so ask your agent to do a comparative market analysis before making an offer.
Source: Redfin