There are many terms that you will hear frequently throughout the process of buying or selling your home. It can get confusing, even if you’ve been through this process many times before.
What terms are you likely to hear and what do they mean?
This term describes funds that accompany a purchase and sale agreement and is sometimes called “good faith money” or “good faith deposit.” This adds strength to your offer by showing the seller you are serious about purchasing the home. If the buyer defaults on the agreement, the seller usually gets to keep this money. If the home purchase is successful, the deposit will be applied to the buyer’s down payment.
Escrow is a legal agreement where funds are held by a third party in a designated account in order to protect all parties involved until specific conditions of a contract have been met. When funds are held “in escrow,” that means that funds are being held by a third party, usually a real estate attorney or brokerage.
What does it mean when there are clouds on a title?
This usually refers to outstanding liens on a property, which happens when the current or previous owner has unpaid HOA bills, unpaid mortgage loan payments, or a myriad of other issues. Clouds on a title can be resolved by a quitclaim deed. A quitclaim deed is a document by which a grantor conveys his or her present interest, if any, in a given parcel of real property to a grantee without representing, covenanting, or warranting that the title is good.
Can I set my own closing date?
Absolutely. It’s common for sellers to want both short and long closing times, but a quick close is usually preferred and will depend on the seller’s circumstances. Your desired closing date is written into the offer your agent submits to the listing agent and will represent your personal needs. This can be a point of negotiation by both sides.
Quick Look Glossary:
Execution: A contract is executed and binding when all parties have signed. Until then, it is not in effect.
Closing: A property is closed when all outstanding fees listed in the closing disclosure are paid, the escrow funds are cleared to be delivered to the seller, and the buyer and seller sign documents to transfer ownership of the property.
Inspection Period: The home inspection period gives the buyer time to inspect the property and back out of the sale if desired. It's usually the last chance for the buyer to negotiate with the sellers to remedy any issues or legally exit the contract for any reason without consequence.
Due diligence: The due diligence period in a real estate contract is defined as a buyer's obligation to thoroughly investigate a property within a specified time to determine whether the buyer remains satisfied with the property before finalizing the purchase.