The world of real estate is full of confusing jargon and acronyms. From “DOM” to “pre-qual,” unusual terms can make an already convoluted process even more challenging for buyers.
If you’re in the market for a new home, here are some important real estate terms for buyers that you should know.
You should speak to your lender about pre-approval before starting your home search. Pre-approval involves providing your lender with details of your financial situation, including your debt-to-income ratio and credit score. With this information, your lender can pre-approve you for a specific loan amount. Additionally, accompanying your offer with a pre-approval letter can make you appear more serious to sellers.
DOM (Days on Market)
Days-on-market is the number of days a property has been listed for sale on the open market. DOM can be a useful way to determine what type of real estate terms to market your local area currently has. For instance, a low average DOM indicates a strong seller’s market. In comparison, a higher average DOM could signal a buyers market.
Buying a property “as is” means exactly that. Typically, with an “as-is” property, the seller is unwilling to perform the majority of needed repairs. Fortunately, the upside to this is that “as is”, properties also tend to be priced lower than market value, meaning you might be able to get a bargain.
Offer and Counter Offer
When you find the home you want, your next step is to provide the seller with an offer in writing. If the seller accepts the offer immediately, you will proceed with the due diligence period. Alternatively, the seller may make a counteroffer, which you will have the opportunity to respond to. Furthermore, this process can happen several times until an agreement is made.
Sometimes sellers allow buyers to put in backup offers on their home, even though it’s already under offer. This is so that they have options should the first deal fall apart. Similar to a standard offer, you must negotiate a backup offer with the seller.
Most standard purchase agreements include a period of due diligence. During the due diligence period, the buyer is given a certain time frame given to inspect the property and decide if they would like to continue with the sale.
If a home inspection uncovers needed repairs, the buyer may have the opportunity to renegotiate the sales contract terms.
Earnest money deposit (EMD)
The earnest money deposit (EMD) is the funds that a buyer puts down as a good-faith gesture to the seller. Typically an escrow company holds the EMD, and it’s anywhere from 1% to 5% percent of the agreed sales price.
A home inspection happens once the seller accepts the buyer’s offer. A licensed professional inspector conducts home inspections during the due diligence period. Inspectors check all of the home’s main components, such as the roof, structure, and appliances.
Homeowner’s association (HOA)
Homeowner associations manage planned communities or condominium complexes. It’s important to note, that you must agree to pay HOA dues and follow all of the HOA rules and covenants. HOA dues vary wildly, depending on the location of the community and the amenities it offers. If you fail to pay your HOA dues or comply with your community covenants, the HOA may file a lien against your property or even foreclose it.
A title search is an examination of public records to find out the history of a real estate property so you can study the real estate terms for buyers. A title examiner is responsible for confirming the owner of record, as well as whether there are any encumbrances on the title, such as unresolved liens. To close the deal, the property title should be free and clear of all liens. Fortunately, title insurance takes care of most liens.