Check Out These Real Estate Terms All Austin Buyers Should Know.
When it comes to buying real estate, understanding the terminology is key. From common realty words like “escrow” and “title insurance” to more obscure terms such as “due diligence” and “zoning,” this guide will introduce you to the top 11 most important real estate terms that all buyers should know.
Appraisal: What is the Home Worth?
An appraisal is an estimate of a property’s market value, as determined by a licensed appraiser. The appraisal is primarily used for mortgage purposes and is paid for by the prospective homebuyer. It usually involves an onsite inspection of the property and analysis of recent comparable sales in the local area to determine the fair market value of the home.
Closing Costs: Money Money Money
Closing costs are fees associated with the buying and selling of a home. Typically, they’re paid by both the buyer and the seller at the time of closing, but can vary from state to state. Closing costs tend to include things like title insurance, escrow fees, title search fees, attorney’s fees, recording fees, REALTOR fees, and loan origination fees.
Contingencies: If this, then this.
A contingency is a clause in a real estate contract that allows either the buyer or the seller—or both—to cancel the contract if certain conditions are not met. Most contracts have a “due diligence” period, which we call an “option period.” During this time, if a home inspection finds issues and the buyer and seller cannot agree on a remedy, the buyer can back out of the sale of the property. Buyers can also add other contingencies to their contract, such as financing or appraisal contingencies.
Escrow: Keep the money safe.
Escrow is the temporary holding of an asset or money on behalf of another. In real estate transactions, escrow refers to a third-party (usually a bank or title company) that will hold the deposit and other related documents for the buyer and seller until all terms of the agreement have been met. Once both parties meet their obligations, the escrow can be released, typically as part of meeting closing costs.
Foreclosure: Bank Owned.
Foreclosure is the legal process by which a lender can take ownership of a property from a homeowner who has fallen behind on their mortgage payments. A foreclosure typically occurs when a loan has been delinquent for more than 90 days, and the lender serves the homeowner with documents that notify them of the start of foreclosure proceedings. It’s important to understand that if you enter into foreclosure, it could remain on your credit report for up to seven years, impacting your ability to secure financing in the future.
Zoning: What is It and How Does it Affect You?
Zoning regulations are laws that determine how a piece of land can be used. This affects everything from the type of structures that can be built on a property, to the number of units allowed, to whether certain activities are allowed. Everyone involved in a real estate transaction should be aware of any zoning restrictions associated with a particular property in order to make an informed decision about purchasing it.
Due Diligence: Do This Before Purchasing a Property.
Before purchasing a property, it is important to conduct due diligence in order to understand all the details of the real estate transaction. This includes reviewing zoning regulations, researching any potential problems with the title, and making sure that the purchase complies with all applicable laws. Additionally, buyers should look into any third-party inspections they may need and make sure that they are comfortable with any repairs or renovations required.
Title Insurance: There are Different Types.
Title insurance safeguards a buyer’s investment by protecting them against defects that might exist in the title of the property being purchased. This type of insurance protects against things such as legal challenges to ownership, liens on the property, survey information errors, and undiscovered encumbrances. There are two main types of title insurance – lender’s title insurance and owner’s title insurance. Lender’s title insurance covers the lender while owner’s title insurance covers the owner. It is important to understand which type of coverage is required before purchasing a property.
And the Last Three: Permits, Easements, and Covenants.
Before you purchase a property, it’s important to understand any applicable permits, easements, or covenants. Permits are permits issued by the local government that can restrict the use of the property. Easements are rights granted by the owner to a third party granting them access to the property for a specific purpose — such as the right of way. Covenants are rules or agreements between landowners restricting how they use their land – such as prohibiting certain types of activities on a property. It is important to research these regulations and restrictions prior to purchasing a home.
It’s a good idea to get professional advice from an experienced real estate lawyer or agent before you purchase a home. Make sure to discuss the terms of zoning, due diligence, and title insurance with these professionals. They can help to explain any applicable government permits, easements, covenants or regulations that can restrict how you can use the property. This way, you can make an informed decision and ensure that your new home meets all of your needs and expectations.
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