As you search for a new home to buy, you will come across some terms you’ve never heard before. Welcome to the club! Real estate has always had its own realty terms and jargon. It can get confusing to those who don’t work with real estate every day.
Top Realty Terms
The following realty terms are some of the most frequent that come up during house hunting, negotiations and sales. Keep them in mind as you start your home-buying adventure.
Ad Valorem Taxes
This is the term for taxes that are levied against something based on its value. In the case of home ownership, it typically refers to the property tax on your home. It’s important to know the rate in the area where you plan to buy, as paying taxes is part of the monthly expense of homeowner (it’s usually paid as part of your mortgage payment).
Agreement of Sale
This is a document signed by both the seller and buyer. The buyer agrees to purchase property from the seller, if the terms of the agreement are met. In a real estate transaction, this is essentially a way for the buyer to show good faith that they intend to make the purchase, if certain criteria (such as no problems found with the home inspection) are met.
This refers to loans in which the borrower pays off the debt in installments. Most mortgages are set up as amortization loans. Make sure to ask your lender for an amortization schedule, which will show what each month’s payment goes toward (the principal amount of the loan, interest and taxes).
Bill of Sale
This is a document that shows one person has transferred the title of a property to another person. It provides legal evidence that the title to a property has changed hands. It’s one of the important final documents signed at the end of a real estate transaction.
This is a Latin phrase meaning, “Let the buyer beware.” It’s important to keep in mind if you are looking for a home to buy. Make sure to do all the steps necessary to make the purchase go well. Hiring a professional agent is a good step in this direction.
A buyer typically makes an offer on a home. The seller can accept that offer. Or, they can make a counteroffer. That counteroffer effectively is a rejection of the first offer. As a buyer, anticipate getting a counteroffer rather than acceptance of your first offer.
These are clauses in a deed that limit how a property can be used or changed by an owner. Most planned communities have these in place to protect the look and feel of the neighborhood. It’s important to know the details of the deed restrictions on any home you plan to purchase to ensure it doesn’t prevent you from doing something you wish to do, such as placing a building in the backyard.
An easement means having the right to use someone else’s property for a specific purpose. In the case of your home, it typically means the government having the right to use some of the property to put down utility lines. It’s important to know where these easements are on your property so you do not place anything in them that could block work in the easement.
Market Price and Market Value
Market value is an estimate of what a fair price is for a property with all things being equal and no unexpected factors impacting the sale price. The market price of a property is the actual value it has sold for in the past.
A prepayment penalty is charged by some mortgage lenders if a buyer ends up accelerating their payments and paying off the loan early. As a buyer, you want to know if there is a prepayment penalty clause in your mortgage. Obviously, it’s something you would rather avoid.
When you take out a mortgage, each month’s payment includes principal, taxes and interest. Principal is the actual amount of the loan. This is where you want extra payments to go if you can make them and there is no prepayment penalty.
Variable Rate Mortgage
This type of mortgage features an interest rate that can change over time. Most mortgages featured a fixed rate. A variable rate is tied to a specific index and can rise and fall in any given year. These are some of the realty terms you may run into as you seek to buy a home. For the best help in navigating the complex world of real estate, contact a professional with a successful track record in partnering with clients in finding a new home.