There is a wide range of risks taken in shopping for a home amongst a bag of many homes. As essential as this is, the processes can be very daunting and demoralizing in the absence of prior facts, hence, the need to come to a precise and accurate understanding of necessary terms that it entails. Having a basic understanding of important real estate concepts before you start the home buying process will give you peace of mind now and could save you a fortune in the future.
There are some specific terms that should be explored but those terms are not limited to these;
- BUYER’S AGENT AND LISTING AGENT
These are the two agents involved when you buy a home. The buyer’s agent represents you, and the listing agent represents the home seller.
However, there is such a thing as ‘Dual agency’. This is when there is only one agent representing both sides of the transaction, and it is something you want to avoid at all costs. A tip to this term is that when buying a home, you don’t pay your real estate agent. They will get a commission from the home seller.
- PRE-APPROVED LETTER
Before you apply for a mortgage or even start looking for a home, you should get a pre-approval letter from the bank, which is an estimate of how much they’ll lend you. This letter will help you determine what you can afford, and ensures home sellers that you will be able to get a loan when needed. When you go in for a pre-approval letter you should be clear on what the bank is offering. Ask them about closing costs, what fees are involved, what you’re getting for that fee, and if they’ll lock in your loan at a specific interest rate.
- INSPECTION
After you’ve made an offer on a home, you’ll need to schedule an inspection, which cost much, depending on the market. The inspector will go through every nook and cranny, and review things like the plumbing, electrical, foundation, walls, heating, and appliances. It is always instructive that you get advices from your realtor on a good inspector. If they find something wrong, you can negotiate for a reduced price. If they miss something, you could be stuck with expensive repairs after you have purchased the home.
- APPRAISAL
When you apply for a mortgage, your lender will require an appraisal of the home you want to buy. A licensed appraiser will estimate the home’s value based on comparable homes that have sold in the area and an investigation of the property.
- CONTINGENCIES
When you put in an offer on a home, you can specify certain conditions that must be met before the deal will go through. These are called ‘Contingencies’. Contingencies in the loan, contingencies in that the inspections are not bizarre, contingencies in the appraised value of what I am willing to offer.
- CLOSING COST
Be prepared to pay a lot of fees when you purchase a home. Typically, closing costs will amount to 2-5% of the purchase price of the home, and that doesn’t include the down payment (an initial payment done when something is purchased on credit). Common fees include excise tax, loan-processing costs and title insurance. This is called the ‘Closing cost’.
