School is back in session: The ABC’s of Real Estate
Grab your favorite notebook and that pen with the pink fluff on top: It’s time to learn about the basics of real estate. There may or may not be a quiz, so listen up.
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A: Appraisal – an estimation of the home’s market value by a licensed appraiser based on recent sales of comparable homes in the area.
B: Back-Up Offer – secondary offer on a home that is under contract that becomes active if the primary contract falls through for any reason.
C: Closing Costs – Buyer Side: cost of obtaining the loan, including but not limited to appraisal, survey, title fees, and escrow. Seller side: title fees, Realtor commissions, taxes in arrears (in Ohio).
D: Down Payment – percentage of the home purchase price (usually 3-20%) paid on closing day.
E: Earnest Money – a security deposit held by either the Buyer Broker or the Title Company. This deposit is returned to the Buyer upon closing, or if any contingencies of the contract are not met. This deposit is released to the Seller if the Buyer breaches their contract.
F: FHA Loan – government-backed program that insures loans designed for low-to-moderate income borrowers
G: Good Faith Estimate – provided from a lender to a borrower, GFE is an estimate of fees due at closing. New mortgage regulations in 2015 replaced this form with one called a Loan Estimate.
H: HomeOwners Association (HOA) – management organization within a community, subdivision, or neighborhood which creates and enforces rules for homes within its jurisdiction.
I: Inspection – an examination of a property and its system, completed by a qualified professional. The real estate contract is contingent upon an inspection done and paid for by the Buyer.
J: Jumbo Loan – mortgage exceeding the conforming-loan limit, commonly used for luxury homes.
K: Knob and Tube – a rudimentary system of electrical wiring, used up to the 1950sconsisting of tubes held in place by porcelain knobs. A home containing knob and tube may have difficulty securing home insurance and is a consideration for potential buyers to have replaced.
L: Liens – a form of security which can be held for the payment of debt. Encumbrances are other restrictions on the property including setbacks and right-of-ways that can complicate the sale process.
M: MLS – a database for Realtors to list and market for sale properties.
N: Net Proceeds – amount received by Seller at closing after all other title fees, Realtor fees, taxes, and payoffs have been paid.
O: Open House – event hosted by a Realtor to show the home to potential Buyers.
P: Pre-Approval – a letter from a lender indicating that they are willing to loan a specific amount of money for a home purchase.
Q: Quit Claim Deed – deed transferring property rights without any validation of ownership, typically used between spouses and family members.
R: Realtor – a person who works in the real-estate business who is a member of the National Association of Real Estate Boards, or one of its constituent boards, and abides by its Code of Ethics.
S: Survey – a property survey confirms a property’s boundary lines and legal description. It also determines other restrictions or easements included in the property. While you can technically get your property surveyed at any time, confirming the boundaries of your land is an important part of the home buying process.
T: Title – a document that lists the legal owner of a piece of property. Titles can be issued to depict ownership of both personal and real property. The different types of real estate title are joint tenancy, tenancy in common, tenants by entirety, sole ownership, and community property.
U: Upfront Costs – the only upfront costs of buying a home are the inspection cost and the earnest money. You will get your earnest money back at closing. Closing costs and downpayment will be due at the closing day.
V: VA Loan – A VA loan is guaranteed by the U.S. Department of Veterans Affairs. The loan itself isn’t actually made by the government, but the fact that it’s backed by a government agency makes lenders feel more comfortable offering these loans, because they take on less risk than with a conventional mortgage.
W: Walk Through – the final time you get to walk through the home to insure no damage has been done, and any remedies that were agreed upon have been completed!
X: X Marks the Spot – at closing you will sign multiple documents, and once you sign on the dotted line, you are officially a homeowner!
Y: YOLO – You only live once, right? If you find your dream home, go for it!
Z: Zero-Lot-Line – a residential property that comes up to or lies on the home’s property line. Because one side of the home’s structure is near the edge of the lot, the property has no room between the house and the boundary line.
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