Real Estate Terminology
Useful Terms to Understand Before Buying or Selling

Warranty Deed
We are always searching for the Warranty Deed when we prepare to "List" a home. We need from it the "Legal Description" of your property. These are usually found by the home owner after much fussing with his wife and running around the house like a crazed fool. Real Estate agents enjoy asking the sellers about it at the last minute so they can assess how organized this particular seller is going to be. Seriously, it is an important document and the original should be kept in your lock box at the bank and a copy of the deed at home.

Title Insurance
A policy insuring the owner and/or the mortgagee against defects in the title.

You are required to purchase title insurance for the mortgage company (yes, you pay for it) and you should always, always purchase title insurance to cover yourself. Amounts vary and information can be received from the closing attorney. Very important. It could protect your deed and prevent you from losing your home should a claim appear from a former heir,etc. In the past years there have been many wild and crazy incidences of people laying claim to entire communities for one reason or another – could be an old heir cheated out of land or a group of people who felt they had held title to this property at one time or another.

The Title Insurance protects your home for the life of your ownership and Pays All of The Attorney Fees involved in Protecting You if needed. It does not transfer with ownership or if you move away to another property.

Titles
The right to ownership of land; also, the evidence of ownership. Title encompassed all the bundle of rights attached to a property. Title may be held individually, jointly, in trust or a partnership form. Married couples normally hold a "Joint" title.

Homeowner Warranty Program
Not to be confused with the Warranty Deed. Homeowner Warranty is a form of an insurance program issued by specific companies warranting specific items in the home (air conditioner, furnace, etc.) against a defect or breakage. Usually paid for by the Seller for the New Purchaser on a Resale. Builders will often have a 1 year program for the New Purchasers and the Builder pays. It is probably not prudent to renew one of these programs after the 1 year time frame expires.

Points
Charged by the mortgage company. A unit of measurement used for various loan charges. One point equals one percent of the loan. Do you know how much your mortgage company is charging you. (real estate agents always check that amount for you and make sure you are not getting charged too much.

Discount Points
An added loan fee charged by a lender to make a percentage rate lower than the current market rate.

Construction Loan
Loan made of the construction of homes or commercial buildings. Usually funds are disbursed as needed during periodic times of the building process. Disbursements are based on an agreement between borrower and purchaser.

Appraisal
I have found a great deal of the people are very confused about his process.

The process which establishes the value of the property. This is completed by a professional appraiser and not a real estate agent. Real estate agents establish value by the current market value (which is defined as "whatever someone is willing to pay for your home at the current time" and based on the values of what other comparable homes have sold for). Please note: it does not matter what your neighbor has listed his home for and thinks yours might be worth.

The process works like this: If you decide to list your home, the real estate agent establishes for you a value of what your home would "probably" sell for based on the other sale prices in the SD-again, homes comparable to yours in size, shape and condition. The home is professionally appraised by the Bank or mortgage company the buyer has chosen after the buyer has placed a contract on your home. If your buyer is a "cash" buyer, and no loan is necessary, then an appraisal is not required and the home sells for the price established on the contract. If, however, there is a mortgage required and the mortgage company appraiser establishes that the contract price on your home was "OverPriced" then the contract can be null and void based on how your contract was written. You may have just allowed your very much needed purchaser a way out of the contract. Very important – another vital role of a real estate agent.

Earnest Money Deposit
An amount of money to be deposited by the buyer under the terms of a contract, which is to be forfeited to the seller if the buyer defaults. This amount is will show at the closing as a credit to the buyer toward the purchase of his home.

There appears to be some confusion about this also.

The amount of the Deposit is usually 1/10 of 1% of the purchase price. Ex: $100,000 contract and $1,000 deposit as earnest money. (Sellers – get as much deposit as you can-so you can hold your buyer in the deal and would hurt him to just walk away). Buyer’s give as little earnest money as you can get away with- so if you want to change your mind afterall, not so much lost.)

"Default" of the purchaser basically means that you just cannot change your mind about purchasing the home unless you want to give up the earnest money amount.

Contingencies are written into the contract and almost always there is a financial contingency for the Purchaser. If he cannot get his mortgage then he gets his money back. There are also many other types of contingencies that can be written into a contract to protect either party – depending on who is writing the contract contintencies and how they write them and who knows more than the other.

Another reason for having a "realtor who knows their stuff"!