The experience of selling your home for the first time involves learning new terms and understanding important legal standards. First time home sellers have experience as home buyers, so there is some real estate transaction experience. Familiarity with real estate language is especially important because misunderstandings cause expectations to be different from reality. Many of the following words may have a familiar ring to them and with a quick read-through you can be an expert in understanding the home selling process:
Get to Know the Lingo:
Appraisal – An appraisal is a statement of value and condition performed by an individual approved by the finance company of the buyer. The appraisal demonstrates to the lender that your house also qualifies for the loan. There are different appraisal formats for different types of lenders, and these documents are only valid for 6 to 12 months. Commonly, the buyers pay for the appraisal because it is specific to the type of financing chosen by the buyer. The appraisal is actually the legal property of the lender, even though the lender usually allows sellers, agents, and buyers to have copies.
Contingency – Unless a buyer pays all cash, every purchase is contingent on something. The sale could be contingent on a loan approval, appraisal, sale of another home, or one of many other events that must occur to successfully conclude a sale. In most cases, a deposit is refundable in part or totally if a contingency cannot be lifted by a certain time, and the sale is cancelled.
Disclosure – Written expression of property facts that are known to seller, but may not be obvious to buyer. Most states require written disclosure of physical defect to buyers. Federal law requires disclosure of lead-based paint hazards to buyers of all homes built before 1978.
Escrow – Escrow companies are neutral third-party services that hold money and sometimes keys until all parties have performed as agreed. Escrow companies also draw settlement documents,and provide a neutral location for buyers and sellers to sign papers and receive money and keys.
Grantee – The buyer of the property who is named in the deed. Grantee does not have to sign the deed and receives physical possession of the deed.
Grantor-The seller must sign the deed and “grant” the interest to the buyer. The seller is the “grantor,” and the signature must be notarized.
Non-recurring Closing Costs– Expenses that would only be paid once per transaction such as escrow and title fees and inspection fees are non-recurring closing costs. Many loans allow non-recurring costs to be added to loan amount.
Personal Property– Property that is included with sale, but is not real property. Personal property includes appliances that are not built-in and non-custom window coverings that are easily removed. The market value of personal property identified on sales contracts may reduce appraised values by same amount because home loans cannot be secured by personal property.
Prorations-Loan interest, property taxes, utilities and other expenses that are paid monthly or yearly will be divided into days. Sellers will receive a refund of prepaid items, and buyers will pay according to the day they take ownership. This method of calculation is called “pro-rating,” and the funds are known as pro-rations.
Real Property – Land and permanent improvements to the land. Improvements include all structures and fixtures inside of the property lines. Fixtures include: built-in appliances, wall-to-wall carpeting, light fixtures, plants and most window coverings.
Recurring Closing Costs– Costs that continue as time passes; such as property taxes, utilities and homeowners association dues. Recurring closing costs are pro-rated and paid at close of escrow.
For more information about selling your home or the home selling process, please don’t hesitate to contact us!