If you’re currently involved in a Duluth real estate transaction, or soon will be, get ready to hear a ton of words and phrases that you’ve maybe never heard before or, if you have, you don’t quite get their meanings.
While the following make up the tip of the iceberg, these are the terms we are most frequently asked about.
Addendum – Any time a change is made in the original purchase contract the party that makes the change must submit an addendum to the other party. Some of the changes that may be made include an extension of the closing date, additional time for inspections or changes in the purchase price to reflect the seller's payment for repairs.
Appraisal – The buyer's lender will have the house appraised by a professional appraiser to determine its current market value. This ensures the lender that it is lending the appropriate amount of money for the home.
Certificate of title: This document ensures that the seller legally owns the property being sold and that no other party has claims against it.
CMA (Comparative Market Analysis) – A CMA is the determination of the home's value by a real estate agent and is used to determine a fair asking price. It is similar to the appraisal but does not take the place of it.
Contingency – When certain conditions must be met before the buyer is locked into the contract the buyer's agent will insert these conditions into the contract. Common contingencies include those for the sale of the buyer's home, the successful procurement of financing at certain terms and inspections.
Contingency Release -- When the contingency requirements are met, both parties to the transaction will be asked to sign a contingency release form to acknowledge that fact.
Counteroffer – If you are not in agreement with the price or terms of the buyer's offer we'll file a form known as a counteroffer, eliminating or changing the parts of the offer to which you don't agree.
Disclosures – Full disclosure is the seller's most important duty. Not only is it required by law, but it protects you as well as the seller.
Earnest Money Deposit – When the buyer submits an offer to purchase she will also submit a cashier's check to be set aside as "earnest money." The amount of money varies, but it is generally 1 percent of the purchase price. The deposit is typically held either in the listing broker’s trust account or with the title company until the close of escrow when it will be applied to the purchase of the home.
Escrow – Escrow is a process that ensures the purchase funds are distributed and the transfer of the house is completed. It is overseen by an escrow company, which is a neutral third party.
Escrow Impounds – Escrow impounds include prepaid taxes and insurance. The impounded funds provide insurance to the lender that taxes and insurance payments will be made. The lender can request no more than two months payments.
Final Walk-Through – Although it sounds like something a man on his way to death row might do, the final walk-through is performed by the buyer. He has one last chance to view the house to ensure that it is in the same condition as when he agreed to purchase it.
Title Insurance – An insurance policy that protects against damages due to defects in the chain of title.
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