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Understanding Real Estate Terminology!
by: W. Troy Swezey
Purchasing a home can be a complicated and confusing process, especially for
first-time buyers. Throughout the process, first-time home buyers will encounter
a variety of unfamiliar real state terms. There are several key terms associates
with purchasing real estate that are helpful to learn.
For example, many buyers confuse the terms broker and salesperson. A broker
is a properly licensed individual, or corporation, who serves as a special agent
in the purchase and sale of real estate, a salesperson is an individual employed
or associated by written agreement by the broker as an independent contractor.
The salesperson facilitates the purchase or sale of real estate.
Once you decide to purchase, a salesperson will prepare a sales contract to
present to the seller along with your earnest money deposit. The sales contract
is the document through which the seller agrees to give possession and title of
property to the buyer upon full payment of the purchase price and performance of
agreed-upon conditions. The earnest money is a buyer’s partial payment, as a
show of good faith, to make the contract binding. Often, the earnest money is
held in an escrow account. Escrow is the process by which money is held by a
disinterested party until the terms of the escrow instructions are fulfilled.
After the buyer and seller have signed the contract, the buyer must obtain a
mortgage note by presenting the contract to a mortgage lender. The note is the
buyer’s promise to pay the purchase price of the real estate in addition to a
stated interest rate over a specified period of time. A mortgage lender places a
lien on the property, or mortgage, and this secures the mortgage note.
The buyer pays interest money to the lender exchange for the use of money
borrowed. Interest is usually referred to as APR or annual percentage rate.
Interest is paid on the principle, the capital sum the buyer owes. Interest
payments may be disguised in the form of points. Points are an up-front cost
which may be paid by either the buyer or seller or both in conventional loans.
In general, there are two types of conventional loans that a buyer can
obtain. A fixed rate loan has the same rate of interest for the life of the
loan, usually 14 to 30 years. An adjustable rate loan or adjustable rate
mortgage (ARM) provides a discounted initial rate, which changes after a set
period of time. The rate can’t exceed the interest rate cap or ceiling allowed
on such loans for any one adjustment period. Some ARMs have a lifetime cap on
interest. The buyer makes the loan and interest payments to the lender through
amortization, the systematic payment and retirement of debt over a set period of
time.
Once the contract has been signed and a mortgage note obtained, the buyer and
seller must legally close the real estate transaction. The closing is a meeting
where the buyer, seller and their attorneys review, sign and exchange the final
documents. At the closing, the buyer receives the appraisal report, an estimate
of the property’s value with the appraiser’s signature, certification and
sporting documents. The buyer also receives the title and the deed. The title
shows evidence of the buyer’s ownership of the property while the deed legally
transfers the title from the seller to the buyer. The final document the buyer
receives at closing is a title insurance policy, insurance against the loss of
the title if it’s found to be imperfect.
Buyers should plan on a least four to twelve weeks for a typical real estate
transaction. The process is difficult and at times, intimidating. A general
understanding of real estate terminology and chronology of the transaction,
however, will help any real estate novice to confidently buy his or her first
home.
About The Author
W. Troy Swezey is the author of “UNDERSTANDING REAL ESTATE TERMINOLOGY." As a
Realtor at Century 21 Paul & Associates, he has helped many individuals with
their real estate needs. Visit his web site to download his free e-book, “REAL
ESTATE SECRETS EXPOSED.”
http://www.TroyIsMyRealtor.com or mail to:
TroyC21@usa.net
You can reprint this article (if not stated otherwise above) on your
website or publication with notice "Reprinted from Zongoo!
Investing".
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