Whether you watch HGTV’s “Flip or Flop” or you like to peruse photos of listings, here is a list of real estate terms and phrases that you should know!
- Active listing: A home that is for sale and available.
- Pending/Under contract: The sellers have accepted an offer. This home is now off the market, but it has not closed yet so there is a possibility of the deal falling through.
- Closing: After an offer is accepted and all parties do their due diligence, the buyers and sellers meet with their title company and sign all the necessary paperwork to exchange the house for the purchase price. Everything now transfers to the buyer’s name. From contract to closing usually takes 30-45 days.
- Purchase agreement: The contract to purchase a home that a buyer presents to the sellers.
- Possession after closing: Sometimes a seller wants extra time to move out or arrange their next living situation so they negotiate retaining possession of the home for a set time after closing. The closing occurs as normal and everything transfers to the buyer’s name and they start paying the mortgage (although they don’t pay utilities until they move in), but the buyer does not get access to the house until the agreed date. This time period can be anywhere from 1-60 days. (Usually expressed on a listing as “Possession: 15 days after closing” or “Possession: 15 DAC).
- Earnest deposit: When an offer is accepted, a buyer will deposit a check with a neutral third party. Should the deal go through, the deposit is applied to the down payment. If the buyers legally back out due to a contingency in the purchase agreement, they get the earnest deposit back. Only if a buyer defaults, or goes against the contract, would the sellers have a claim on the deposit.
- Inspection period: With the purchase agreement frequently used in West Michigan, there is a 10 day period built in for the buyer to inspect the home once the offer has been accepted. If the buyer does not approve of the findings they can legally withdraw from the transaction.
- Appraisal: For a purchase that will be financed by a mortgage, the bank/lender will arrange for a an appraisal (paid by the buyer!). The purpose of an appraisal is so the bank can determine if this home is worth the risk of lending their money. The appraiser visits the home to verify the details (bedrooms, square footage, upgrades etc) and then compares this home to other homes that have sold recently in the neighborhood to establish their opinion of value. The bank will only lend up to what the appraised amount is.