Understanding real estate terminology may not make a home buyer as knowledgeable as a real estate agent, but it can help a buyer understand more about everything from their finances to the market. The process of buying a home is imprecise, and varies from block to block and week to week. This list doesn't cover all terms that a buyer may hear, but it's still a good cheat sheet to have on hand.
This formula refers to the total amount the buyer will pay for their loan (as opposed to the total cost of the home). So if a buyer uses their loan to help pay for closing costs, the amount they tack onto the cost of the home will be calculated (plus interest). Homeowners with adjustable interest rates can still use the amortization formula, though they should be aware their total will be an estimation only.
Property taxes for both the city and state are not determined by the price at which the home sells for, but rather by the public tax assessor who will visit the home. Once the assessor decides how much the home is worth, the buyer will have a better idea of how much they'll owe to both entities.
Buyers have a number of other costs beyond that of the property. They'll also need to account for expenses such as inspection fees, application costs, and the real estate agent's rate. These costs are bundled together and referred to as closing costs.
Just because a seller accepts a buyer's offer, doesn't mean the actual sale will go through. This period refers to the tentative period after acceptance but prior to closing. During this time, the lender may rescind their financial promising or the seller may refuse to honor the contingencies they originally agreed to. Most escrow periods last about a month, but this is only an average.
This complicated term can be boiled down to the amount of property the homeowner owns. If a person has put down 20% of the total price of the home, then the lender could be said to own the other 80%. As buyers might imagine, all financial institutions want to see as much equity from the buyer as possible.
Home inspections are conducted to determine the major flaws of the home, and they can help buyers determine how much to pay for the property. Inspections can be ordered by either the buyer or the seller, but real estate professionals typically encourage buyers to do their own inspections to ensure accuracy.
The listing agent refers to the seller's agent because they technically listed the home on the market. It is possible for the listing agent to also serve as the buyer's agent, although the conflict of interests is such that most experts would highly advise against it.
Private Mortgage Insurance (PMI)
PMI is a type of policy for lenders in case a buyer can't afford their home payments. Buyers are typically required to pay for this policy if they are unable to put down at least a 20% down payment for their home.
This insurance policy covers the legitimacy of the home's title. If there are any disputes over the property lines or who has right to the home (e.g., a family member, an ex-spouse, etc.), this precaution can help the buyer both before and after they purchase the home.
Fully understanding the lingo of real estate can't be done in a day or even a few weeks. However, Hermosa Beach home buyers should have a strong idea of the costs, restrictions, and rules that will affect how much they pay and how they go about acquiring their home.