Real Estate Terms You Should Know When Buying and Selling
Buying or selling a house is both an exciting and stressful time. Learning the terminology and how the process works is daunting, especially for first-time buyers. Here’s a list of must-know real estate terms that can help you navigate your home buying or selling journey:
Appraisal – the lender needs to know the value of a dwelling before approving a mortgage. A lender is certainly not going to lend a buyer more money than a home is worth. A professional appraiser looks at the overall condition of the home and checks recently sold comparable properties – “comps” – to come up with a number. Sellers don’t like low appraisals either, but often the buyer and seller can work out a deal if the appraisal price isn’t too far off the agreed upon sale price. For example, if the original price was $600K but the appraisal came in at $575K, the seller may agree to sell for the appraised price.
Closing costs – Hawaii has some of the highest closing costs in the country. At closing, the buyer should expect to pay between 3 to 5 percent of a dwelling’s value in closing costs, not including attorney fees. These closing costs include the appraisal, settlement, home and pest inspection, loan origination fees, title insurance and possibly survey fees.
Contingency clauses – these clauses are standard in every real estate contract. They include loan, inspection, title and appraisal contingencies. If any of these items fail to pass, the buyer is released from the contract. A non-standard contingency clause includes the sale of the buyer’s current home prior to closing on the new property. There is no advantage to this clause for the seller, and sellers should avoid this contingency if possible.
Disclosure – Most Hawaiian real estate transactions require disclosure statements from the seller to the purchaser. Exceptions include sales to family members and foreclosures. The disclosure must reveal any material condition that could affect the property’s value. Material condition may refer to prior flooding or any number of situations involving the property. The disclosure form does not have to reveal anything that does not affect the physical property, such as a crime scene site.
Pre-approved vs. pre-qualified – these terms sound so much alike, some buyers may think they’re interchangeable. Pre-qualifying is the first step toward obtaining a mortgage, and a lender can give you a ballpark figure based on the basic information provided. However, it doesn’t involve analysis of your credit report – and that makes all the difference. Pre-approval requires filing out a mortgage application, and with all of your financial documentation and credit report information, the lender gives you an actual amount for which you are approved.
Title Insurance – this type of insurance guarantees that the seller has the right to sell the property, and that title to the property is “clear,” – there are no liens or similar encumbrances on the site. The title insurance company searches all public records to make its determination. If there are issues with the title, it is usually possible to fix them before the sale. For instance, the owner may owe some back taxes on the property, with a resulting tax lien. Once the lien is paid, the sale can go forward.
Whether buying or selling your home, choosing the right real estate agent is crucial. We guide you through the entire procedure, and ensure you understand what is happening every step of the way. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com