Your browser does not support iframes.
Do you want to understand real estate closing terms? A contract is a legal and binding agreement. Do NOT take it lightly. If you ever attempt to read a real estate contract, you will quickly find that this paperwork is packed with a slew of terms you might not be familiar with. I will cover some of the most common terms you’ll encounter in a real estate contract.
Also known as “good-faith money or escrow deposit”. It is an agreed upon amount put up by the buyer and generally held in escrow or trust, by a title company or a lawyers office. This is to show the buyer is serious about purchasing the home. Buyer must deposit the money within 3 days from an executed contract.
There is no defined amount, but earnest money generally runs about 1% to 2% of the purchase price. When the purchase is complete, that money is applied towards buyers closing costs or down payment. If the contract doesn’t go through both parties must sign off on where the money will be released to.
The date that the last party signed or initialed any terms and/or changes in the sales contract. This is often the date that starts the clock on the contract’s various deadlines (e.g., that a home inspection must happen within 10 days).
The contract’s contingencies (see below) provide the buyer a period to conduct due diligence, which essentially means doing homework. If the buyer discovers the negative information regarding the property during this time, he can cancel the escrow and receive a refund of his earnest money, In the inspection period the buyer has the right to do any kind of inspections they want, to decide if the home is acceptable to them.
Contingencies are requirements that must be met before a real estate deal can close. The customary ones for the buyer’s loan are property appraisal, financing, home inspection, disclosures, and a title report. The specific contingencies are set and agreed upon by the buyer and seller on the contract.
Sellers may disclose to the buyer everything they know about the home since they’ve owned it, whether it’s good (there’s a brand-new roof) or bad (the basement leaks during heavy rains) on a property disclosure. A seller who intentionally withholds information is committing fraud, so when in doubt, it’s best to fess up!
A buyer can do any inspections within a time frame that’s mutually agreed upon with the seller—typically within seven to 14 days of an accepted offer. After an inspection, the buyer can:
A title search basically confirms that the property is owned fair and square by the seller, who can then transfer those rights to the buyer. The tile search will make sure all liens or encumbrances are cleared before the buyer closes. Occasionally, a home’s title can be compromised by long-lost heirs or liens by contractors who did work on the property but never got paid.
If the buyer needs to sell a home in order to finance the purchase of a new home, the seller may decide to include a “kick-out clause” that allows the seller to continue to show the house and accept back other offers.
If the original buyer can’t fulfill the conditions agreed upon then the seller can “kick out” that buyer and go with a new offer, rather than waiting indefinitely to close the original deal.
If a buyer is getting a mortgage, the lender requires the buyer to pay for an appraisal. This is where a third party comes in and estimates the value of the house, with a comparable home in the same area. The home must appraise for the purchase price for the lender to loan the purchase price to the buyer. (If a buyer is paying all cash, an appraisal is optional.)
This is the final stretch of your real estate transaction that involves bringing together lawyers, title companies, Realtors, buyers, and sellers. At the closing, the buyer will provide the funds to purchase the home. It’s also when you get the keys to your new home—in other words, it’s time to move in and celebrate! Buckner Homes Realty will help you through the sales process and the buying process. We make it easy.
This a few of the word you will need to understand while going thru the home buying or selling process. Find out more with the ABC’S of Real Estate and Call Rhonda for Help 352-266-2637.