When selling your home, it is important to understand some of the key concepts and terms. Throughout the selling process, your Realtor® will be available to explain any unfamiliar terms you encounter. That said, here is a short list a terms you’ll want to know:
Abstract Of Title: A complete historical summary of the public records relating to the legal ownership of a particular property from the time of the first transfer to the present.
Adjustable Rate Mortgage (ARM): Also known as a variable-rate loan, an ARM is one in which the interest rate changes over time.
Agreement of Sale: Also known as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller and buyer agree to transact under certain terms spelled out in writing and signed by both parties.
Amortization: The process of reducing the principal debt through a schedule of fixed payments at regular intervals of time, with an interest rate specified in a loan document.
Appraisal: An appraiser’s estimate of the market value of a property based on local market data and the recent sale prices of similar properties.
Assessed Value: The value placed on a home by municipal assessors for the purposes of determining property taxes.
Closing: The final steps in the transfer of property ownership. On the Closing Date, as specified by the sales agreement, the buyer inspects and signs all the documents relating to the transaction and the final disbursements are paid. Also referred to as the Settlement.
Closing Costs: The costs to complete a real estate transaction in addition to the price of the home, may include: points, taxes, title insurance, appraisal fees and legal fees.
Closing Date: This is usually the date that the legal ownership of the property transfers from the seller to the buyer.
Conditions or “Subjects”: Items that are usually put in place to protect a party’s interests upon selling or buying the property and refer to things that must occur or be in place before the sale closes. Some of these conditions could be “subject to financing approval,” “subject to the strata council allowing pets,” “subject to the buyer’s house selling,” “subject to seller finding suitable housing,” etc.
Contingency: A clause in the purchase contract that describes certain conditions that must be met and agreed upon by both buyer and seller before the contract is binding.
Conventional Mortgage: One that is not insured or guaranteed by the federal government.
Counter Offer: An offer, made in response to a previous offer, that rejects all or part of it, while enabling negotiations to continue towards a mutually-acceptable sales contract.
Debt-to-Income Ratio: A ratio that measures total debt burden. It is calculated by dividing gross monthly debt repayments, including mortgages, by gross monthly income.
Deposit: The amount of money provided from the buyer to the seller as a token of the buyer’s assurance and intention to buy the property involved. The deposit is applied against the purchase price of the home once the sale has closed. Your agent can assist you in proposing a certain and appropriate amount for the deposit.
Disclosures: Disclosure statements, which can come in a variety of forms, are the buyer’s opportunity to learn as much as they can about the property. Seller disclosures range come from knowledge of issues with the home. They serve to inform buyers: they can protect the sellers from future legal action. It is the seller’s chance to lay out anything that can negatively affect the value, usefulness or enjoyment of the property.
Down Payment: The money paid by the buyer to the lender at the time of the closing. The amount is the difference between the sales price and the mortgage loan. Requirements vary by loan type. Down payments less than 20% usually require mortgage insurance.
Earnest Money: A deposit given by the buyer to bind a purchase offer and which is held in escrow. If the property sale is closed, the deposit is applied to the purchase price. If the buyer does not fulfill all contract obligations, the deposit may be forfeited.
Easements: Legal right of access to use a property by individuals or groups for specific purposes. Easements may affect property values and are sometimes part of the deed.
Equity: The value of the property, less the loan balance and any outstanding liens or other debts against the property.
Escrow: Funds held by a neutral third party (the escrow agent) until conditions of a contract are met and the funds can be paid out. Escrow accounts are also used by loan services to pay property taxes and homeowners insurance.
Fixed-Rate Mortgage: A type of mortgage loan in which the interest rate does not change during the entire term of the loan.
Home Inspection: Professional inspection of a home, paid for by the buyer, to evaluate the quality and safety of its plumbing, heating, wiring, appliances, roof, foundation, etc.
Home Warranty: Service contract that covers the repair or replacement of home system components and appliances that break down.
Homeowners Insurance: A policy that protects you and the lender from natural disasters, and liabilities such as a visitor injury, or damage to your personal property.
Inclusions and Exclusions: Specifications within the offer that detail the items to be included or excluded from the purchase of the property. Typical inclusions are appliances, window coverings, fixtures and decorative pieces.
Lien: A claim or charge on property for payment of a debt. With a mortgage the lender has the right to take the Title to your property if you don’t make the mortgage payments.
Market Value: The amount a buyer would pay a seller for a home. An appraised value is an estimate of the current fair market value.
Mortgage Insurance: Purchased by the buyer to protect the lender in the event of default (typically for loans with less than 20% down). Available through a government agency like the Federal Housing Administration (FHA) or through private mortgage insurers (PMI).
Possession and Adjustment Dates: When the buyer takes possession as specified in contract of purchase sale and adjustments are made for prepaid taxes, maintenance fees, etc. They are usually the same date.
Possession Date: The date, as specified by the sales agreement, that the buyer can move into the property. Generally, it occurs within a couple days of the Closing Date.
Pre-Approval Letter: A letter from a mortgage lender indicating that a buyer qualifies for a mortgage of a specific amount. It also shows a home seller that you’re a serious buyer.
Principal: The amount of money borrowed from a lender to buy a home, or the amount of the loan that has not yet been repaid. Does not include the interest paid to borrow.
Purchase Contract: A detailed written document which makes an offer to purchase a property and may be amended several times in the process of negotiations. When signed by all parties involved in the sale, the Purchase Offer becomes a legally-binding sales agreement.*
Purchase Price: The amount that the buyer is offering to pay for the property, usually dependent on market conditions and may differ from the seller’s current asking price. There is no “normal” amount or percentage that a price will differ from its asking price as the final price will be determined by many factors, including the seller’s motivation and how close the asking price is to actual “market value”.
Terms: An offer includes certain terms, which specify the total price offered and how the financing will be arranged, such as if you will arrange your own with a financial institution or mortgage broker, or if you wish to take over the seller’s mortgage (assumability).
Title: The right to, and the ownership of, property. A Title or Deed is sometimes used as proof of ownership of land. Clear title refers to a title that has no legal defects.
Title Insurance: Policy that guarantees the accuracy of the title search and protects lenders and homeowners against legal problems with the title.
Title Search: A historical review of all legal documents relating to ownership of a property to determine if there have been any flaws in prior transfers of ownership or if there are any claims or encumbrances on the title to the property.
Truth-In-Lending Act (TILA): Federal law that requires disclosure of a Truth-In-Lending statement for consumer loans. The statement includes a summary of the total cost of credit.
* Offers, terms and contract procedures vary by region.
We believe our job as RE/MAX real estate agents is to walk with you through each step of the home selling process. Connect with us today to learn more about our real estate listing statistics. Our two year average days on the market is 28 days. That’s fast. We work hard for you to get your home sold quickly and for the most money! Call 307-635-0303 or visit us online at cheyennehomestore.com.