If you’re planning to buy and/or sell a house in Evergreen, Colorado, a great Realtor can certainly help make the process smooth. But it never hurts to educate yourself on some of the terminology that might be used during your transaction. Here are some that we think are most important.
1. APPRAISAL: Before giving you the loan for a mortgage, a lender will require that you hire a licensed appraiser to estimate the value of the home you want to buy. If the home is priced over its appraised value, the bank might not approve you for the loan.
2. CLOSING COSTS: When you purchase a home and the homeowner transfers the title to you, there are certain expenses that are incurred.
3. CONTINGENCIES: When you make an offer on a house, you can add conditions that must be met before you close the deal. These contingencies can come in many forms: that you are able to sell your existing home, that the house passes inspection or that you’ll actually get the loan from the bank, to name a few.
4. EARNEST MONEY: This good faith deposit shows the seller that the buyer is genuinely interested in purchasing the home. When the transaction is settled, then the deposit is applied to the buyer’s portion of the remaining costs. If the offer is rejected, the earnest money is usually returned, since no binding contract has been entered into. Laws vary as to what happens with the deposit should the buyer fail to perform on the contract.
5. EASEMENT: A legal document giving someone other than the property owner the right to access and, in some cases, use the property. For example, utility companies often use easements to access power lines or transformers for the neighborhood.
6. ESCROW: An account that holds the buyer’s funds—such as earnest money—temporarily.
7. HOMEOWNER’S WARRANTY: An insurance policy that covers the cost of repairing things in the home within a specific period of time, such as one year after the purchase.
8. MORTGAGE INSURANCE: A policy that protects lenders against losses that result from defaults on home mortgages. FHA requires both upfront and annual mortgage insurance for all borrowers, regardless of the amount of down payment.
9. ORIGINATION FEE: Typically one percent of the bank loan, this fee is charged by the lender to originate the loan for the buyer.
10. TITLE COMPANY: For a fee, the title company will check and insure the property against ownership claims and liens.