Remember that first day on a new job when it sounded as if your colleagues were speaking a different language? Most industries have their own jargon and real estate is no exception. In fact, this industry seems to be the King of Jargon. What’s worse is that people that use it abbreviate those words making it nearly impossible to understand. (I try not to do that).
Today we’re going to help you with some of this language by defining a few of the most common terms you’ll hear throughout the process of buying or selling a home in Pacifica. Soon you’ll be slinging this jargon as if you were a real estate pro!
Addendum – This is a document that is made a part of the original contract. It is typically used to provide clarity on some part of the contract.
An example of an addendum is to change a date; contingency date or closing date. Maybe the buyer needs more time to get their loan in order. They’ll need to request an extension of time; they’ll do that on an Addendum. A home seller doesn’t have to agree to do that, but it’s a pretty common occurrence.
Another example is an Addendum to add or remove something from the contract. Maybe the home buyer asked for the appliances in the purchase, but the home seller will not be leaving them. An Addendum would be used to clarify that.
Contingency – The dictionary defines a contingency as “a provision for an unforeseen event or circumstance.”
In a real estate contract, anything that puts a condition on the buyer’s purchase is a contingency. For example, the buyer agrees to the purchase if the home appraises for X number of dollars. The appraisal becomes a contingency item. Once the property appraises for the correct appraisal price, the contingency is removed with a document called a Contingency Removal. Simple, right?
In essence, what contingencies do is tell the seller that there are conditions to the purchase. A home sale isn’t done until the title transfers to the new owner. Anything can happen between the beginning when a contract is agreed on to the end when the buyer and/or bank makes that final deposit. Once the keys are given to the buyer, everybody can take a sigh of relief.
Counteroffer – This is a form used to counter the terms put forth by the other party. Suppose a Pacifica home buyer submits an offer to purchase a home for $825,000. The seller wants $850,000.
Both parties typically have three options in a situation like this. Agree is one; not agree is another. The third is to negotiate. For example, write a counteroffer for $830,000.
Counteroffers are also used to for other situations like proposing different terms (such as the closing date or possession date).
Disclosures – You’ll read A LOT of disclosure forms during the buying and selling process.
These forms are used to let a buyer know about something regarding the condition or desirability of the house. that either the seller or the broker is legally obligated to disclose. A common disclosure form is a Transfer Disclosure Statement. The seller fills out this form which details everything he or she knows about the home that may affect the buyer’s safety, comfort and enjoyment of the home.
You’ll find details of disclosures at this post: Pacifica Homeowners Ask: Do I Have To Disclose That?
Due Diligence – Due diligence is a legal term, and one that should be taken very seriously. It describes the buyer’s duty to get a thorough assessment of the property to determine its condition.
For example, after closing on a home, a buyer realizes that the home doesn’t have air conditioning and he assumed when he bought it that it did. He attempted to get the price of a new unit from both the seller and the real estate broker. The judge determined that, since the seller disclosed there was no air conditioning in the home, the buyer didn’t do due diligence (either he signed the disclosure without reading it or by not inspecting the home) and denied the claim.
Earnest Money Deposit – Shortly after – like a couple of days – a buyer gets their offer accepted, he or she will show good faith by submitting a deposit to the escrow company. This is often confused with the down payment.
It’s part of the down payment – in Pacifica the initial deposit is 3%. The balance of the downpayment is wired to the escrow company near the end of the process.
This deposit also makes the contract enforceable and is known in the legal world as “consideration.” That deposit is held in escrow (a neutral third party) until the close of escrow when it will be applied toward the purchase price.
Escrow – Escrow can be confusing. It’s, simply, a third party with no ties to the transaction. They “hold” all of the related documents (the contract, deed, etc.) and the money the buyer deposits until it’s given to each party at closing.
Escrow Impounds – An escrow impound account is set up by the lender to hold your prepaid taxes and insurance. When you make your monthly payment, you also pay the taxes and insurance. That way you’re paying a little at a time instead of getting a giant bill all at one time. Not all lenders require an escrow impound, but you can request to have one. It’s not a bad for the new homeowner to have one – one less thing to manage.
Title Insurance – Title insurance protects the new homeowner and the lender against any past or future claims to the property.
There are two types of policies, one for the lender and one for the homeowner – the buyer actually pays for both of the policies. At the beginning of the process of preparing a house for sale the agent will have the title insurance company do a thorough examination of the home’s title to ensure that the owner really does own it, that there aren’t any additional owners who make a claim to the property and any loans that have been taken out on the property.
This list gives you a small sample of some of the terms used during the purchase and sale of a property. But be sure you ask your agent to explain anything you don’t understand – even if you’ve already asked. We know there’s a steep learning curve during a real estate transaction. There’s so much to learn, remember and do! Your agent should happily explain it as many times as you need to hear it!
If you’re thinking of selling a home in Mid Silicon Valley, CA be sure to contact me at 650-888-9268 or Vicki@CallVicki.com. I’d be happy to discuss your situation in detail and give you an honest valuation of your property. I’d love to show you what I do to get homes sold.
About the author: The above article “Real estate terms explained for Pacifica Home Buyers and Sellers” was provided by Vicki Moore, Today Sotheby’s Intl Realty.
We help home buyers and sellers in Mid Silicon Valley focusing on the city of Pacifica and including Foster City Homes and Condos For Sale, Redwood City Homes and Condos For Sale, Redwood Shores Homes and Condos For Sale, San Carlos Homes and Condos For Sale, San Mateo Homes and Condos For Sale. If there’s anything we can do to help you, please let us know.