Real Estate transactions are fast tracking from making an offer to closing. There are many terms and conditions that pertain only to Real Estate and for the lay person, it is like another language. Knowing what these terms mean and how they impact you and the contract before you begin your process, can take a lot of the stress, and delay away from the process.
What is a CMA – comparative market analysis and how is it different from an appraisal? A CMA is usually prepared by a real estate agent to either set a property’s sale price or get an idea of a target price for a buyer and is usually done for free. A CMA uses only a few indicators taken from comparative property sales, such as square footage, the view, how many garage spaces, is there a pool, and how updated the property is. An appraisal is performed by a licensed appraiser, backed up by all the relevant facts of the property, is necessary in getting a mortgage, and is charged for.
What is a lien? A lien is a claim to a property by a bank, mortgage company, or service provider indicating there is money due. The holder of the first mortgage generally has the first claim. Other lien holders can include a contractor or the utilities company. Liens must be cleared up for a sale of a property to go through.
What do closing costs include? Depending on which county the sale is in, buyers and seller are responsible for costs and fees above and beyond the purchase price of the property. A seller typically pays both Real Estate commissions, as well as clearing any leans, tax proration, documentary stamps on the deed and recording fees. A buyer typically pays for all associated loan fees including credit reports, appraisals, lender fees, inspections, title insurance, homeowner insurance, prorated association and tax fees, intangible taxes on a loan (if taken out) and recording of the deed and mortgage. There are also the title company charges, attorney fees, courier and copy costs.
What kind of contingencies can I include in my offer? Contingencies are conditions which must be met for the sale to go through. Contingencies can include financing, inspection, sale of current home and any other circumstances that would need to be rectified prior to closing. In today’s current seller’s market, many sellers are not accepting offer contracts with contingencies.
What is a counteroffer? After a buyer presents an offer, the seller can accept, reject, or counter. A counteroffer can include a price change, closing date change or other contingencies mentioned in the original offer. The contract will only be effective after both parties sign and date in agreement to all components of the contract.
Is my deposit safe? After a contract has become effective and both parties have agreed and signed. The buyer makes, as per the contract agreement, an initial deposit which is held in escrow (safe keeping) by a title company or attorney who will close. Any subsequent deposits, perhaps after the inspection, that are made, also go into the escrow account. Neither the buyer or seller can have access to this money until closing or termination of the contact, and at that point, both parties must sign their approval that the funds can be released. The title company and or the attorney cannot release the funds to either party without the written consent and release of both parties.
Do I need a home inspection? Yes, and by a professionally licensed and certified inspection company. The inspector should check all major systems, roof, plumbing, appliances, water pressure, electrical panels, doors, and windows (this is just a short list). If any of the items are DEFECTIVE, you could go back to the seller and ask for repairs or a credit at closing. This is not for cosmetic issues; cosmetic issues should have been reflective of your offer.
What is the difference between a Mortgage banker and mortgage broker? The banker originates sells and services mortgage loans. The broker is someone who, for a fee, places loans with investors but does not service the loans. A broker can find loans catering to unusual circumstances or to buyers with not-so-great credit.
Should I go to an Open House without my Real Estate Agent? A public open house is open for anyone to walk in and preview a property. A potential buyer can definitely go to an open house without their agent; however, it is imperative that when signing in or speaking with the listing agent, that you mention you are working with an agent already. Your agent does not need to be there, but it is helpful if they know you are going so you have all the information about the property and comps before you go.
What is the difference between a pre-approval and a pre-qualification? Loan pre-approval is a process where the lender certifies that you are financially qualified and credit worthy for a loan up to a cap amount. A pre-qualification is an estimate of how large a loan you may be able to obtain. It’s just an estimate — no credit report is checked, and no promise of a loan is made at this stage, most sellers will not accept this when presented with an offer.