By Tim Freeland
When selling a home, it’s important to understand some of the key concepts and terms. Throughout the sales process, your Realtor® will be available to explain any unfamiliar terms you encounter. That said, here is a short list of terms you’ll want to know:
Abstract Of Title – A complete historical summary of the public records relating to the legal ownership of a particular property from the time of the first transfer to the present.
Appraisal – A professional appraiser’s estimate of the market value of a property based on local market data and the recent sale prices of similar properties.
Assessed Value – The value placed on a home by municipal assessors for the purposes of determining property taxes.
Closing Costs – The costs to complete a real estate transaction in addition to the price of the home, including: points, taxes, title insurance, appraisal fees and legal fees. The accounting ledger used to tally up who owes what is called the settlement statement.
Contingency – A clause in the purchase contract that describes certain conditions that must be met and agreed upon by both buyer and seller before the contract is binding.
Earnest Money – A deposit given by the buyer to bind a purchase offer that is held in escrow. If the property sale is closed, the deposit is applied to the purchase price. If the buyer does not fulfill all contract obligations, the deposit may be forfeited.
Equity – The value of the property, less the loan balance and any outstanding liens or other debts against the property.
Easements – Legal right of access to use of a property by individuals or groups for specific purposes. Easements may affect property values and are sometimes part of the deed.
Escrow – Funds held by a neutral third party (the escrow agent) until certain conditions of a contract are met and the funds can be paid out. Escrow accounts are also used by loan servicers to pay property taxes and homeowner’s insurance.
Home Inspection – Professional inspection of a home, paid for by the buyer, to evaluate the quality and safety of its plumbing, heating, wiring, appliances, roof, foundation, etc. An Inspection Contingency is addressed in the standard Purchase Agreement Contract.
Lien – A claim or charge on property for payment of a debt. With a mortgage, the lender has the right to take the title to your property if you don’t make the mortgage payments.
Mortgage Insurance – Purchased by the buyer to protect the lender in the event of default (typically for loans with less than 20 percent down). Available through a government agency like the Federal Housing Administration (FHA) or through private mortgage insurers (PMI).
Possession Date – The date, as specified by the sales agreement, that the buyer can move into the property. Generally, it occurs on or within a couple of days of the Closing Date.
Pre-Approval Letter – A letter from a mortgage lender indicating that a buyer qualifies for a mortgage of a specific amount.
Purchase Offer/Agreement – A detailed, written document which makes an offer to purchase a property, and which may be amended several times in the process of negotiations. When signed by all parties involved in the sale, the purchase offer becomes a legally binding sales agreement.
Title Insurance – Insurance policy that guarantees the accuracy of the title search and protects lenders and homeowners against legal problems with the title.
Title Search – A historical review of all legal documents relating to ownership of a property to determine if there have been any flaws in prior transfers of ownership or if there are any claims or encumbrances on the title to the property.
This isn’t the complete list of terms. Many others will come up but this should give you a good start on terms typically encountered with most transactions.
Tim Freeland, Realtor® with Edina Realty, can be reached at 507-581-5038 or tim@timfreeland.com.
