Appraisal: the process of developing an opinion of value for real property (usually market value). In order to obtain financing for a property, an appraisal needs to be performed by a licensed appraiser. Appraisal reports form the basis for mortgage loans, settling estates, taxation, and so on. Sometimes appraisal reports are used to establish the sale price for a property.
Capital Gains: an increase in the value of a home above the purchase price. A homeowner who has lived in a home for two of the previous five years can exclude up to $500,000 of capital gains tax if married and filing jointly, or up to $250,000 if single or filing separately. We recommend consulting with your accountant to confirm.
Closing Costs: at Settlement, you will be required to pay fees for loan processing and other closing costs in full, unless you are able to include them in your financing. Typically, closing costs range between 2-5% of your mortgage loan amount.
Closing/Recording: closing occurs after Settlement when the County has received the final deed from the seller conveying the property to the buyer. Once this transfer has occurred, the buyer owns the property. Your escrow officer or lender will notify you of the exact amount of money you’ll need to bring to Settlement so your Closing can occur within 1-3 business days after Settlement.
Comparative Market Analysis (CMA): an evaluation prepared by a REALTOR® of similar, recently sold homes (called comparables) near a home intended to be bought or sold. Comparative Market Analyses help establish the current market value of a home. A CMA differs from an appraisal.
Down Payment Requirements: Most loans require a down payment between 3.5-25% depending on the type and terms of the loan. There are programs that you may qualify for with no money down, however, you will need to discuss which type of loan suits you best with your preferred lender.
Due Diligence: an approximate two weeks period dictated by the terms of the Real Estate Purchase Contract (REPC), during which buyers have the opportunity to inspect the property from top to bottom including a full home inspection, meth test, radon gas, sewer scope, structural review, etc. If any defects in or around the property are discovered, the buyer can negotiate repairs with the seller, waive repairs, or withdraw from the contract if the home
or negotiations are not satisfactory for any reason.
Earnest Money: the deposit a buyer puts down to show the seller they’re serious about buying. When you write an offer, the Earnest Money amount will be included. It’s usually around 1% of the purchase price. Earnest Money is deposited and held at the Title Company within four days of offer acceptance. If the transaction is cancelled within
the parameters and deadlines (Due Diligence or Financing and Appraisal deadline) of the contract, the Earnest Money will be returned to the buyer. If the buyer decides not to cancel the contract and move forward with the sale, the Earnest Money will go towards the total down payment.
Escrow Account: a neutral depository held by your lender for funds used to pay expenses incurred by the property, such as taxes, assessments, property insurance, or mortgage insurance premiums. You will pay one-twelfth of the annual amount of these bills each month with your regular mortgage payment. When the bills fall due, the lender pays them from the special account. At closing, it may be necessary to pay enough into the account to cover these amounts for several
months so that funds will be available to pay the bills as they fall due.
Financing: providing funds for buyers for making purchases, business activities, or investing. Financial institutions and banks provide capital to consumers, businesses, and investors to help them achieve their goals — like buying a house.
Plat: map or chart of a lot, subdivision, or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements. Real Estate Purchase Contract (REPC): contract that outlines the terms and conditions of a purchase of real estate. It lists the buyer(s), seller(s), agent(s), purchase price, concessions, what comes with the home, deadlines, contingencies, and other legal contractual items.
Settlement: the final REPC deadline. The buyer signs all necessary documentation for the transfer of title from seller to buyer, hands over closing costs, and spends about an hour signing documents; this process typically takes place at the Title Company.
Title Insurance: protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to a “mortgagee’s title policy.” Insurance benefits will be paid only to the “named insured” in the title policy, so it is important that an owner purchase an “owner’s title policy,” if he/she desires the protection of title insurance