7 Terms Every Homebuyer Should Know
If you are planning to buy a home, you should understand the contract to know your protections, and to make sure that you are well-informed. All real estate purchases involve sales contracts and purchase agreements, which may vary from state to state and from company to company. Some terms that you need to understand include the following:
- Cost sheet: This is not included in the purchase contract, but it is important. The buyer must concentrate on the buyer cost sheet which is also known as cash to close. The cost sheet given to the buyer is usually produced by the lender, but can also be given by a real estate agent. It details everything that you need to pay when buying a home. The details that are found in buyer cost sheet include: inspection fees, transfer fees, appraisal fee, closing costs, down payment, and other prepaid items like homeowner’s insurance, prorated property taxes, and homeowner association dues. Some costs, like closing costs, are sometimes shouldered by the seller after the deal has taken place.
- Commission authorization: The buyer’s agent and the listing agent both have commission that is negotiable and usually comes from the seller’s sale of the property.
- Contingency: Contingencies are most commonly used for home inspections and home financing. It is a clause found in the contract which shows the condition of the sale and whether any monies can be returned if the sale falls through. Contingencies can be negotiated.
- Disclaimer / disclosure: This varies depending on each location. These are the details that homeowners should bring up to potential buyers. Most states demand the buyer to fill out the form with whatever they know about the property. There are states that demand the sellers to disclose anything that may affect the desirability and value of the property such as if the area is fire-prone, included in the list of earthquake fault zone, flooded-prone area, or whether the home is within or near an airport.
- Earnest money deposit: This is usually given as part of the down payment after both the seller and buyer have agreed on the deal. This should be included in the written agreement.
- Escrow: This is a written document that shows all the financial aspects of the contract including the down payments. It records all the transactions within the contract and should be kept until everything has been paid in full.
- Good-faith estimate: This is not part of the contract, but is necessary for the deal. This shows the buyers how much can they expect to be paying for the potential property that they are looking into.
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