The real estate industry can be a tricky and confusing world to navigate through, especially if you are first-time homebuyer. While most real estate terms can seem straightforward, like “fixed-rate loan” or “closing”, real estate jargon can be pretty confusing and may leave you scratching your head.
So whether you are in fact a first-time homebuyer or a seasoned real estate investor, here at 4 common real estate terms you should know:
1. Short Sale- In a short sale, a bank or a mortgage lender agrees to discount the balance of an outstanding current mortgage of the property, due to market conditions and the borrower’s financial hardships. However, the property owner/borrower retains the ownership of the property, not the bank. Once sold, the proceeds from the sale are used to satisfy the debt and are turned over to the lender. Typically, short sales are done in order to prevent foreclosure; therefore a short sale may not always involve a property in foreclosure.
A short sale is an opportunity where a seller may obtain acceptance from the lender for a lower pay off, giving a buyer the opportunity to obtain a property at below its’ market price.
2. Sale-price-to-list-price ratio- What is the sale-price-to-list-price ratio? It is the final sale price (what a homebuyer actually pays for a home) divided by the last list price calculated as a percentage. For example, if a home was listed for $100,000 and sold for $60,000, the sale-to-list ratio would be 60% ($60,000/$100,000). Looking at the sale-to-price ratio can help both buyers and sellers with negotiating as well as getting a general outlook on the local market.
3. Median days on market- The real estate market is all about time and speed. The shorter time it takes to file paperwork, honor commitments and transactions, the happier everyone involved in the process will be. The longer a house stays on the market, the harder it is to sell. Agents and everyone involved marks the success of a transaction based on the time it takes to finish a closing. The median number of days on the market is a term used to classify the market’s relative strength in a particular area.
Why is this important? The faster a home sells, the more demand there is in the market.
4. Buyer cost sheet- Know what you’re paying for? Although this is not part of the contract, a good real estate agent will show you what exactly your expenses will be when purchasing a home. For a buyer, this is sometimes referred to as “cash to close” and will typically be outlines by the lender, if not the agent.
So here we are, 4 common real estate term you should know. But there are many terms that are equally as important and just as confusing.
However, seeking a quality real estate agent can help streamline the entire process for you and your family. Trust us, selling a home or buying a home is an arduous process and you are better left handing over the work to a professional. Agents will help you understand the ever changing terms and regulations of this industry.