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7 real estate terms every buyer should know

7 real estate terms every buyer should know

Real estate language can be confusing, especially for first-time homebuyers. Here’s a simple guide to seven of the most important real estate terms you should know.

1. Active listing

The home of your dreams can be yours if it’s an active listing. While there may be others also interested in the property, the term active listing means an offer hasn’t been accepted and no one has signed a contract.

2. Contingencies

Clauses in a buyer’s contract that say the buyer will purchase the home “unless…” are contingencies. For example, “I agree to purchase the home for $750,000 unless a home inspector says the residence is in need of major repair and/or I can’t get a lender to approve my mortgage loan.” Think of contingencies as escape clauses should certain situations arise.

3. Disclosures

A disclosures document is something you absolutely need to read for yourself. It contains all information a seller is required to tell a prospective buyer about their home (what’s required varies by state).

Sellers generally are honest with disclosures as they want to avoid legal action if a buyer should discover undisclosed issues like mold from a past water leak. Read the disclosures carefully to avoid any surprises after signing.

4. Escrow

Once you have a signed contract with a seller, the home-buying process moves into escrow. It then becomes the job of a third party, the escrow officer, to ensure that both sides meet each agreed-upon step by the specified deadline.

Escrow fees are typically split between the buyer and seller and, depending on your location, cost about 5-10 percent or more of the home’s purchase price. When escrow is closed, the home is considered sold.

5. Inspections

The professional home inspector you hire is your detective, finding anything that could potentially need repairing in the home you want to buy. Do your homework, and be sure to ask your agent for recommendations.

You can plan to hire a home inspector after you enter the escrow phase. If there is anything wrong with the home, you can ask that the seller repair it, adjust the price accordingly or you can back out of the sale.

6. Property deed

A property deed and a title are not the same thing. The deed is the legal document that transfers the title from one party to the other during a sale or transfer, as with a gift or inheritance. The deed must be a written document recorded in the assessor’s office or courthouse to be legally binding.

7. Title

How you hold title determines the future of the property if you want to modify or sell it, or in the event of your death. The title is the property’s record of ownership and can be held by one, two or more people — split evenly or each with a different percentage. You can transfer your portion of land when you hold the title, but only your percentage if there are multiple title-holders.