Photo by Sieuwert Otterloo on Unsplash
Buying a home can be an exciting and stressful process, especially when you’re a first-time buyer. You can never be sure what to do to start, such as whether you can buy a house 10 weeks from today or what kind of mortgage is best for first-time buyers. There are many things to consider when buying a home, from location to size and price. And there are a lot of terms that might be difficult for you to keep on top of this process. To make the process easier for you, here are four real estate terms that will help to make sure everything goes smoothly:
Earnest money
Earnest money is a deposit that buyers make on the sale of a property. It’s meant to show the seller that you’re serious about buying the property, and it’s also a way for you to prove that you have enough money to cover the cost of your purchase.
The amount of earnest money will vary depending on the type of property you’re purchasing and what state it’s in. For instance, if you’re buying an apartment building or commercial property, your deposit might be higher than if you were purchasing a single-family home.
Good faith estimate
A good faith estimate is a document that is required by law to be given to home buyers. It’s an estimate of closing costs incurred when buying or selling a home. The lender provides this information to you as a buyer, and it helps you budget for the cost of your mortgage loan,
The lender signs off on the document, so it’s in their best interest to ensure they’re not charging you more than they can justify. The lender also has an obligation to provide accurate estimates of closing costs if they don’t want buyers to be able to claim damages later on if there are discrepancies between what was estimated and what occurred at settlement.
Contingency
Contingencies are terms that are included in real estate contracts. They are clauses that allow either party to withdraw from the agreement if certain conditions are not met. Contingencies can also be used to protect the interests of both parties, and they should be considered when negotiating any purchase or sale of the property.
For example, if you do not have enough money for a down payment on your next home, you may want to ask for an “earnest money deposit” from the seller as part of your contingency agreement. This way, both parties will know exactly where they stand with each other financially before closing on the transaction.
Imagine how luxury property developer and expert investor Joe Sitt would have fared had he not had contingencies in his contracts. You just don’t know what will happen when it comes to real estate, and it’s wise to have a backup plan or two in place before you begin.
Escrow
An escrow is a third-party account that holds money or documents until a transaction is complete. When you buy a house, the buyer and seller have to work through many details—and they often have to trust each other with large sums of cash. In the past, buyers would just hand over cash at closing, but today’s home buyers are more skeptical. They want proof that everything has gone according to plan before they turn over their hard-earned money.
An escrow account keeps both parties honest by giving them access to their funds only when all conditions are met, so no one can cheat anyone else out of their hard-earned dollars!
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