Defining Common Real Estate Terms & Exploring Expectations
Making the exciting choice to purchase your first home in Seattle (or around the globe) is likely equal parts thrilling and intimidating. If you don’t have any experience in real estate transactions, your home-buying journey will be a learning experience. Although you’ll learn plenty on the fly, readying yourself by studying up on some important real estate terms beforehand will allow you to feel more prepared and informed as you embark on this major new chapter. As always, an experienced real estate advisor will be able to guide you through any confusion and answer all of your questions, but if you’d like to do some fun homework on your own before getting started, read on for our home-buying glossary and guide.
1. Getting Started
You’ve likely spent a good amount of time scouring listings online, making a checklist of your wants versus needs, and scoping out the best neighborhoods in your desired region. But once the necessary initial vision-boarding is done, it’s time to take a serious look at your finances so you can begin your search in earnest. You’ll want to start with a mortgage pre-approval, which is when a lender examines your financial history, credit score, and income and decides how much of a loan you can qualify for. Don’t confuse this with a mortgage pre-qualification, which is more of a loose estimate and based on a less intensive process by the lender. Once you receive the pre-approval figure, you’ll have an idea of the price range you can shop within and be able to seriously begin your search.
2. Making Moves
You know what you’re looking for, you’ve completed the pre-approval process which has informed you of how much you can borrow (and therefore how much you can spend), and now it’s time to shop. You’ll likely start attending open houses, which is when a property is available for homebuyers to tour on a specific date within a time range. This will be a good time to not only scope out the home visually but also ask the selling agent questions about the property. You may want to know things like whether there is a Homeowners’ Association, which is an organization within the community or neighborhood that manages communal features or amenities, like pools, lawn care, snow removal, etc. Homeowners’ Associations offer perks but they also mean extra costs, or “dues,” so keep that in mind.
When you find the home you’d like to purchase, you’ll make an offer—this is how much you’re willing to purchase the home for and any additional terms, like contingencies. A contingency is a clause that will allow you to back out of the purchase if certain requests or terms are not met. These can range from requiring that a seller make specific repairs to ensuring there are not any liens against the property. Contingencies offer a level of protection, and unless you’re entering an incredibly competitive market, they are recommended for buyers. If the seller doesn’t accept your offer, they can come back with a counteroffer, which will be their response to the number you/your broker submitted. This part of the home-buying endeavor is considered the negotiation process. You may go back and forth with a seller or you may quickly land on a price both parties deem acceptable.
3. The Grand Finale
If the seller accepts your offer, congratulations! The home is now yours (basically). You will then deposit your earnest money (this is a show of good faith to the seller) with a third party and it will be held in escrow until you officially close on the home. Because you’ve already done the work of getting preapproved early on, getting officially approved for a loan should simply be a matter of submitting additional documentation to your lender. You’ll want to have the home inspected, which is when a licensed inspector will examine the home for any potential undisclosed issues, ranging from wiring to plumbing to structural elements. Your broker will be able to guide you through the various steps to ensure a smooth closing, meaning all documents have been signed, your downpayment has gone through, and the home is officially yours!
The home-buying process has many moving parts and even seasoned investors require a trusted real estate advisor by their side to guide them through it. The above should give you a head start on understanding some of the lingo and processes involved in buying a home, but don’t hesitate to reach out to us today so we can get the ball rolling together—there’s no need to do it alone!
