Looking to buy a new home, but all the real estate lingo has you scratching your head? Here are just a few terms potential homebuyers should know while searching for houses on the market.
1. Buyers Agent
Buyers Agents are hired by those looking to buy a new home. They’re a great asset to potential homeowners since they typically have advanced knowledge of the local market they work in such as neighborhood and safety ratings. Buyers Agents are also beneficial because they look out for and protect the buyers best interest. They help their clients with submitting and negotiating offers, legal fees, paperwork, and facilitating home inspections. Their fees are generally covered by the seller of the home. Often times, a Buyers Agent will be working with the sellers Listing Agent.
2. Listing Agent
A Listing Agent differs from a Buyers Agent in that they work for the client whose selling the home. Its estimated by Money.com that about 90% of people selling their homes hire a Listing Agent. As with the Buying Agent, a Listing Agent looks out for the best interest of the seller. They can make home improvement and other suggestions that they think may help your home sell quicker. They also help price the home, often times hire a professional photographer to take pictures of the home, and handling the advertising. This usually includes holding open houses. Typically, once a home is sold, the commission on that home is paid for by the seller and is split between the Buyers Agent, Listing Agent, and Broker.
*Note* Sometime the terminology “selling agent” is floated around and confuses home buyers and sellers alike. The Selling Agent is the agent who actually sold the home – so it could technically be either the Buyers or Listing Agent.
3. Fixed Rate
A fixed rate mortgage is a loan whose payment stays the same throughout the life of the loan. Generally, these loans are offered at a 5 year, 15 year, or 30 year lifespan. The advantages to this kind of loan are your payments are always the same and easy to budget, it can increase your home equity, and you might be able to make extra payments to pay off the loan sooner. This loan does tend to have a higher interest rate than loans such as an Adjustable Mortgage Rate.
4. Adjustable Mortgage Rate
Adjusted Mortgage Rates, also known as AKAs, are loans whose interests rates can move up or down throughout the life of the loan. This causes the homeowners monthly payment to fluctuate. Most of these loans have an initial fixed-rate period, followed by a longer period where the rate changes at preset intervals. These loans tend to initially have a lower interest rate than other loans.
5. Assumable Mortgage
This less common loan allows potential buyers to essentially take over the current home owners mortgage loan. The buyer agrees to make all of the remaining loan payments owed by the current homeowner. Not all types of mortgage loans are eligible for this type of agreement.
6. Earnest Money Deposit
An Earnest Money Deposit, also known as EMD, can be made to the seller by the buyer as a good faith agreement. It shows the buyers commitment to purchasing the home and allows them more time to seek out financing options. It usually works out to about 1% to 2% of the purchase price. This deposit is generally held in a joint trust or escrow account by the buyer and seller until a decision is reached. Potential buyers take note, you might not be able to obtain the deposit back if deal falls through. It could go towards any monetary damage obtained by the seller.
Depreciation is the decrease in your homes value over time. Its caused by wear and tear of the structure.
Appreciation is the increase of your properties asset value over time. Real estate demands, local real estate market, developed infrastructure, and the economy can all play a role in the appreciation of your property. Interest rates and lending guides can also play a factor, e.i. looser guidelines equal more home ownership, which causes home values to go up.
9. Closing Costs
Closing Fees are those associated with the home purchase to close the transaction. These fees can be paid by either the seller or the buyer and may include the following: application fee, appraisal, attorney fee, closing fee, credit report, home inspection, home owner association transfer fee, origination fee, pest inspection, survey fee, etc. These fees typically add up to about 2% to 5% of the homes purchasing price.
Contingencies are the criteria that must be met after the offer is accepted, but before the contract is binding. The three major categories tend to be home inspection, mortgage approval, and appraisal. For example, certain repairs must be made, home insurance obtained, or the home must pass inspection before the deal is done.