10 Real Estate Words You Need to Know
Do you speak “real estate”? When you sell a home, you need to be familiar with the language. Some common words already in your vocabulary have a special meaning in real estate transactions. Though there is a dictionary full of words to consider, let’s think about a few that might be of concern to you when you go to sell a home, depending upon the situation.
Mortgage – The legal documents that oblige you to pay for the property over a certain length of time constitute your mortgage. The property itself secures the loan. When you sell your house you must pay off the mortgage. The new owner will obtain his own financing.
Title – A title is a listing of the history of owners, debts, and other information related to your house. Title is produced by researching the documents recorded in the land records of your county. If you have multiple liens and mortgages on your property, selling a home and transferring the title to new owners can be complex.
Disclosures – You must state the condition of the property as you know it. The regulations about what must be disclosed vary by state, but issues such as water damage or a leaky roof should usually be mentioned to potential buyers. If you are not in a position to repair problems, you should at least put them on the table so the buyer can decide whether he/she wants to take them on.
Price – The amount of value in terms of money at which property is offered for sale or is exchanged for at a sale. Often, there is a discrepancy between the price which the house is listed and the selling price. Setting the price at a level that considers its value and those of comparable properties in the neighborhood can bridge the gap.
Appraisal – A third party evaluator examines the property to determine that the price is in line with comparable properties. If the appraisal comes in too low, the lender will either refuse to write the loan or request that the buyer contribute more downpayment.
Equity – The amount of financial interest the homeowner invests in the property is considered equity. Equity can be calculated by subtracting your martgage balance from the crrent market value of the home. If the value of your home has decreased, you could be in a negative equity position. The amount of equity you have might influence your decision to sell a home.
Underwater mortgage – If you owe more on your home than it is currently worth, your mortgage is considered “underwater.” If you sell a home for less than you owe, you may have to pay your lender the difference.
Short sale – If the lender agrees to accept less than the amount owed on the mortgage, the property can be sold at short sale. The process can be lengthy; in addition to the normal negotiation between yourself and the buyer, the lender determines what amount they will accept.
Foreclosure – If the borrower can’t pay the mortgage, the lender can begin court proceedings to rescind his interest in the property. If the property is sold at auction, the proceeds are applied towards the mortgage.
Deficiency judgment – If the proceeds from a sale are less than the amount due on the mortgage, the lender can aim to collect the balance of the debt in certain states. For any short pay, the lender will send a 1099 to the IRS for the borrower to claim as income.
Though selling your home can be complex, your Realtor® speaks the language. The real estate word you really want to hear is “SOLD.” Although you can try to sell the home yourself (a FSBO sale), a qualified agent can help you price your home or even help you prepare for a short sale to avoid foreclosure if your equity is low. Another option is to sell your home fast through a reputable home buying company.
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