Important Real Estate Terms Brooklyn Home Buyers Or Sellers Need To Know
Real estate terminology can get confusing for Brooklyn Home Buyers or Sellers. After all, there is a lot of information you receive in the home buying or selling process. It may feel like you have to ask a hundred questions to understand the process clearly.
Real estate professionals often forget that some of our terms are not common to clients. For this reason, I am sharing a simple explanation of some of the words you may need to know.
Mortgage-related terms for Brooklyn home buyers or sellers:
Adjustable-Rate Mortgage:
type of home loan with a variable interest rate set for a period of time and then the rate adjusts at predetermined intervals.
Amortization:
the schedule of your monthly payments showing how much of your mortgage payment goes to interest and principal until your mortgage is paid in full with the last payment.
Appraisal:
an independent evaluation initiated by the lender to determine a property’s value. An appraiser evaluates the home’s condition and comparable sales in the neighborhood. This report validates the purchase price.
Assessed Value:
a public assessor determines the property’s value for tax purposes.
Cash Reserves:
remaining funds after paying the down payment and closing costs. Lenders generally require some reserves to ensure you have the financial ability to make payments.
Closing Costs:
these are fees required to cover mortgage and title expenses for a property transfer. Both buyer and seller are responsible for a portion of the costs.
Downpayment:
the amount of money paid upfront in a home purchase. Most lenders require a certain percentage based on the mortgage loan program you are obtaining.
Escrow:
a financial account set up by the lender and funded by the homeowner’s mortgage payments to cover property taxes and homeowner’s insurance when due.
Equity:
the difference between the property value and any outstanding mortgage amount owed on the property.
Interest Rate:
the percentage of interest charged for financing a mortgage. The lender determines interest rates.
Fixed-Rate Mortgage:
the interest rate remains the same for the life of the loan.
Loan-to-Value:
this is a ratio used by lenders to measure the loan amount to the value of the property. A larger down payment will lower the ratio and appeal to the lender.
Mortgage Broker:
an individual who acts as an intermediary between borrowers and lenders. Usually works with several different lenders to provide options.
Preapproval Letter:
the letter provided by a mortgage lender verifying the buyer’s financial ability to purchase a property. Sellers generally require this letter as part of the offer process.
Private Money Loan:
is money borrowed from an individual investor, usually used by real estate investors to finance deals that may not qualify for a traditional loan.
Private Mortgage Insurance:
this fee is a percentage of the mortgage loan when a buyer puts down less than 20% and can be satisfied once the homeowner reaches a certain equity level. It is also known as PMI.
Proof of Funds:
a statement from a financial institution that verifies the buyer has enough funds available to complete a cash purchase offer.
Refinancing:
a homeowner will usually restructure their loan later after closing to either reduce the interest rate or pull out equity.
The first step for a home buyer is to work with a lender to determine the price range of the house they qualify for and the monthly payment that comfortably fits their budget. Understanding the above terms will help you when meeting with the lender. Nerdwallet discusses how to obtain a pre-approval in this article.
The real estate purchase agreement or contract offers its terms for Brooklyn home buyers or sellers.
As-Is:
a property offered in “as-is” condition means the seller is unwilling to repair the home. It does not necessarily mean there is anything wrong with the property. The property frequently offers a lower to sell in “as-is” condition. A buyer can still elect to have a home inspection for informational purposes.
Addendum:
a separate form or addendum is used to add any additional terms and conditions included in the sale but not covered in the real estate purchase contract.
Buyer’s Agent:
is a real estate agent who represents the sole interest of the buyer in the home buying process.
Contingencies:
conditions the buyer or seller needs to meet before purchasing a property can close. Typical contingencies are inspections, mortgage approvals, and appraisals.
Disclosures:
sellers are required to complete property disclosures that may reveal various defects or improvements that may affect the home’s condition. Required disclosure varies by market. Typically, the areas covered in a disclosure include general information about the house, known environmental issues, known structural issues, and mechanical systems.
Due Diligence:
This is a time-specific opportunity for a buyer to examine the property thoroughly. Generally, this timeframe is for inspections or performing tests.
Earnest Money Deposit:
a deposit made by the home buyer typically when they enter into a contract with the seller demonstrating their earnestness in purchasing the home. The amount is held in an escrow account until closing and deducted from the buyer’s cash needed for closing.
Inspections:
a buyer may choose to inspect the property before deciding to move forward with purchasing a home. Typical inspections are general home inspections, wood-boring insect or pest inspections, and radon inspections.
Listing Agent:
is a real estate agent who represents the sole interest of the seller in the home selling process.
Mortgage Contingency:
a condition in the purchase contract that the buyer must receive a mortgage commitment from the lender by an agreed-upon date.
Seller’s Contribution/Seller’s Assist:
the seller agrees to pay a percentage or defined dollar amount towards the buyer’s closing costs if negotiated.
Title Insurance:
usually required as part of the closing process, title insurance protects the buyer from the responsibility of an undiscovered lien after closing on their new home.
Title Search:
an examination of public records to confirm the property’s rightful legal owner and determine if any claims or liens on the property would affect the purchase.
Transfer Tax:
when property transfers from one owner to another in the state of New York, transfer tax is collected and typically paid by the seller.
That is a lot to remember, but your real estate agent can refresh your memory as you review the sales agreement together. This previous blog post will help you to learn more about how a real estate agent can help Brooklyn home buyers or sellers.
There is some miscellaneous terminology you may hear that may need some clarification:
Comparables:
are comparable, similar homes sold in a defined radius of the subject home used to establish a fair market value.
Distressed Property:
property can be in disrepair; an owner may have defaulted on their mortgage payments or property taxes are delinquent.
Fee Simple:
this term describes the most common type of homeownership. A property owner can transfer, or an heir can inherit the property rights at the owner’s discretion.
Flipping:
an investment strategy of purchasing a home, making improvements, and then reselling the property for a profit.
Foreclosure:
a bank repossesses a property due to the owner’s inability to make mortgage payments.
MLS:
the Multiple Listing Service is a database available to licensed real estate agents to view property listings.
Motivated Seller:
a homeowner may be pressed for time, nearing foreclosure, or own property out of state and are open to negotiating a favorable price for a property.
Probate Sale:
If the death of a homeowner occurs and they do not have a written will, the probate court authorizes an estate attorney or representative to hire a real estate agent to sell the home.
Real Estate Auction:
usually, a financial institution will sell repossessed homes through an auction to the public. Privately homeowners may also choose an auction to sell.
Short Sale:
a homeowner can not sell their property for more than what they owe on the home. The lender must approve a short sale.
Real estate has specific acronyms and terms that can confuse those not working in the field like any other industry. However, when you hire a real estate professional to work on your behalf, they can answer your questions on anything you do not understand.
Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate. As a Brooklyn real estate agent with over 30 years of experience, I help many home buyers and sellers with their real estate needs. Reach me by phone at (718) 253-9500 ext. 1901 or by email at [email protected]
Tags: brooklyn homes, brooklyn real estate, brooklyn real estate agent, brooklyn realtor, Charles D'Alessandro
