If you’ve ever been apart of the process of selling your home, you’ve probably gotten confused at all the terminology used by the real estate agents. That’s why we’ve created a list of some basic terms that you should know if you wish to have success when selling your home.
Amortization
This is a system related to paying off your mortgage by combining the principal and interest into the payment. Instead of just paying the interest, you organize both in a payment structure. This might mean that you pay more of the interest at the beginning with more of the principal in the end.
Assessed Value
This is the dollar amount assigned to the property by a public tax assessor. This number is used in your city and state tax valuations. This isn’t often the same amount that is assigned from a private home appraiser and is often different from the amount you can sell for.
Cash Reserves
This is the money that’s left over for the buyer once the closing costs and down payments are complete.
Closing
You know this as the meeting where the sale of the home is complete. Both the buyer and seller will exchange funds and sign the required documents. The term settlement is often used as a way to describe this.
Closing Costs
These are the fees and expenses which are normally paid from the buyer at the settlement. Examples include mortgage fees, commissions, title insurance and recording fees.
CMA
Otherwise known as Comparative Market Analysis, this can also be called “comps.” It’s a report of other homes in your area that have recently sold or are on the market. It’s used as a way of determining the accurate value for selling your home.
Contingency
This is a clause written into an agreement to keep things binding until a condition is met. Common contingencies include a home inspection before the purchase begins.
Earnest Money Deposit
This is given with an offer and is a payment to the seller in good faith. If the offer is accepted, it will be counted toward the down payment. If the offer is not accepted, the deposit is refunded.
Equity
The difference between your home’s unpaid balance on the mortgage and the fair market value. Your equity increases over the life of your loan. As an example, if your home is valued at $200,000 and you owe $75,000, the equity is $125,000.
Escrow
This account is set up by the lender to receive monthly payments from the buyer for insurance, taxes and other expenses.
Home Warranty
Either the buyer or the seller can purchase this to protect the house from future problems.
Interest
This is the cost the lender charges for borrowing money. Sometimes, interest is referred to as a rate.
MLS
Short for Multiple Listing Service, this is an organization which collects home sale information for distribution to its members. The data populates home listing sites and membership isn’t open to the general public.
Mortgage Broker
A company or person that brings together the borrowers and lenders. They don’t actually fund the loan, but they do find the source ideal for the customer.
Principal
This is the amount of money you borrow to purchase the home. If you buy a $150,000 home with a 10% down payment, your principal is $135,000. This is the amount you’ll pay back in addition to the interest.
Point
Each point is equal to 1% of the value of a loan. Buyers are given the option to buy discount points by paying additional money up front. Then they are given a lower interest rate in return.
Private Mortgage Insurance (PMI)
This insurance premium is paid to the lender by the buyer as a protection for the lender if the mortgage goes unpaid. Once the equity of the home reaches 20%, this is discontinued. This is a good option for people that don’t have a 20% down payment to buy a home.
Real Estate Agent
Any professional that has acquired a real estate license for their state. Furthermore, there are normally a required amount of classes plus a test, although those requirements are going to vary state to state. In addition, agents will work under the direct supervision of a broker.
Realtor
This is a real estate agent that is part of the national association of Realtors. They are required to uphold a level of standard and ethics as a member in the organization. Keep in mind that not all real estate agents are also Realtors, so this is something to watch closely for.
Real Estate Broker
This agent has gone beyond the required level of education and passed a broker’s exam. On top of that, they’ve also met a certain number of transactions to earn a license by the state. In fact, they might have affiliation with another agency, work alone or hire agents to make their own team.
Real Estate Investor
A professional who evaluates the market and buys property to make an income. Investors might purchase commercial, residential or a mixture of both based on what their objectives are. Make sure you read the pros and cons of selling your house to an investor.
Title Insurance
This policy protects the owner and lender from unexpected claims to ownership. We’ve done a complete article on title insurance for you to understand it a little deeper.
Still Confused About Selling Your Home?
If all of these terms regarding selling your home have you confused, it’s okay! We know how tough it is to navigate the selling process, which is why we’re here to help. By selling your home to Integrity Homebuyers, you can effectively skip most of the home selling process and simply collect your money. We’ll take care of the rest.
Sound good to you? Contact us today to get started.
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