Financial Terms to Know for Home Sellers
Important Terms to Know When Selling a Home
Handy Definitions For Common Home Selling Language
In today’s blog, we’ll be looking at some of the terms that you are likely to come across when selling your home, following up on my blog from two weeks ago which covered the terms on the buyer side. It’s essential to understand what is going on when you are buying or selling a home, and the best way to stay in the know and make sure everything is working in YOUR favor is by working with an experienced Realtor. When you work with me on buying or selling your home, you’ll be working with a trained professional, who can guide you through all of the steps of the process, and make sure you avoid any potential pitfalls along the way.
With this blog, I’m hoping to provide you with just a fraction of the security that comes with working with an experienced agent by defining some of that real estate jargon you are likely to run into when buying or selling a home. Additionally, when you work with me, you’ll have a dedicated closing coordinator watching your transaction from beginning to end, making sure that your closing goes as smoothly as possible!
Conventional Sale: A conventional home sale is the most common type of sale in the real estate world. A conventional sale occurs when a homeowner either owns the property outright, meaning they have paid their mortgage off fully, or they owe less on their property than what the market expects it to sell for.
Capital Improvement: Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.
Cash-Out Refinance: A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.
Earnest Money Deposit (EMD): A deposit made by the potential home buyer to show that he or she is serious about buying the house.
Effective Age: An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
Equity: A homeowner’s financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage.
Escrow: An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.
Escrow Holder: An escrow holder is the impartial third party that manages the escrow account and deposits made into that account. They hold onto escrow deposits, documents, and other items of importance during a real estate transaction and release these materials once certain contractual obligations have been met.
Home Equity Line of Credit (HELOC): A credit line that is secured by a second deed of trust on a house. Equity lines of credit are revolving accounts that work like a credit card, which can be paid down or charged up for the term of the loan. The minimum payment due each month is interest only.
Inspection: A home inspection is when a professional home inspector examines a home to determine if there are any major structural or safety issues with the home that would affect the sale. They will typically look at the roof, electrical system, plumbing, the exterior of the home, etc.
Due Diligence Period: This gives the buyer the right to have the home inspected in a specified time period. Depending on the findings of the home inspection, the potential buyer can negotiate repairs with the seller or cancel the contract (and have their earnest money returned).
Preliminary Report: A preliminary report is a document typically obtained from a title company/closing attorney that details any issues with the title of a home in order to determine what needs to be done in order to deliver a clean title to the home buyer. It will detail any liens on the property, and the information on the property including lot size, property boundaries, etc.
Seller Concession: A seller concession is when a seller offers certain concessions in order to attract buyers to purchase their home. The seller will offer concessions to the buyer, meaning that they will offer a certain amount of money for the buyer’s closing costs. The concessions can go towards paying for the title insurance, inspection fees, points on the mortgage, etc.
Seller Disclosure: The seller’s disclosure is a comprehensive document filled out by the seller that details all of the pertinent information about the property to the best knowledge of the seller. This disclosure includes material facts and known issues about the property that might affect the decision of the buyer to proceed with writing a contract. In Georgia, a Seller Property Disclosure is not required by law, but a seller must disclose any latent defects with the property that could not be easily discovered through inspections.
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