Having a basic understanding of important real estate concepts before you start the home buying or selling process will give you peace of mind and minimize your frustrations. Here are a few real estate terms you should know before you start looking for a home.
Buyers Agent vs. Listing Agent-
Most real estate transactions involve two agents. The agent representing the Buyer has a fiduciary responsibility to look out for the best interests of the Buyer. The Listing Agent is working for the Seller of the home and has their best interest at heart. The good news for Buyers is that the commission is typically paid by the Seller.
Listings- This refers to inventory. That is, properties that are considered available properties for sale. All active listings are shown in the Broker’s Multiple Listing Service (MLS) which will have the most up-to-date information.
Fixed Rate vs. Adjustable Rate Mortgage- If you are using a loan to purchase your home conventional loans are classified as either “fixed” or “adjustable”. A fixed rate mortgage has a predetermined interest rate throughout the life of the loan; the most common are for 30 years. An adjustable rate mortgage has a variable interest rate; the most common are for 5, 7, or 10 years. Adjustable rate mortgages can make financial sense if you’re planning to sell or refinance your home before the introductory period ends; but if you’re planning to own your home longer than five years, it’s less risky to choose a fixed rate loan. It is important to shop around so you can get the best mortgage possible, which will save you a lot of money in the long run. We are happy to give lender recommendations, but you should also ask your friends and family who they have had success using.
Pre Qualification Letter- It is a good idea to talk to your banker before starting the buying process. They will look at your financial situation to determine the value of a loan they are willing to provide and give you a pre qualification letter. 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. Our local lenders are all very familiar with the unique market conditions and can walk you through this process.
Inspections- A Buyer should always have the property inspected before closing. It is an important step in discovering any defects in the property. Most inspections cost between $500-$800 depending on the size of the property. A good inspector will go through the property with a fine tooth comb examining plumbing, electrical, appliances, heating. etc.
Appraisal- Not to be confused with an inspection, the appraisal is required by the lender to confirm the sales price is accurate. A licensed appraiser will estimate the home’s value to make sure you are not overpaying. Before making an offer, ask your agent to do a comparative market analysis, which will tell you what comparable homes have sold for nearby.
Contingencies- A provision in a contract that requires the completion of a certain act or the happening of a particular event before the contract is binding. For example, you may have to have a financing contingency which protects the Buyer to ensure they can get the money. An inspection and appraisal contingency are also commonly seen.
Offer and Contracts- Once you find the right property you will want to make an offer. An offer demonstrates an intention to enter into a contract. It creates the power of acceptance in the other party. Once accepted it is considered a contract. Often times, the other party will counter your offer (meaning they usually want more money) your agent will help you negotiate this.
Closing Costs- Expenses of the sale outside of the cost of the property. Some closing costs are legal requirements; others are a matter of local custom and practice. Many costs are fixed regardless of closing date others (like taxes, prepaid items) are variable expenses. Ask your lender about every fee involved in the Good Faith Estimate, and see if you can shop around for a better price for those services or negotiate down. Examples include homeowner’s insurance, wire transfers, underwriting and settlement fees.
Title Insurance- When we think of insurance we think of protection of loss from some future event. Title insurance in effect protects the policyholder from a past event such as a forged deed. Title insurers also search the public records to make sure the home seller actually had rights to the title and that there are no liens on the home (like an unpaid contractor or unpaid taxes). The good news for Buyers is that Title Insurance in Wyoming is customarily paid by the Seller.
Check out our list of more real estate terms