For first time homebuyers or someone who hasn’t bought or sold a home in a long time, real estate jargon can be confusing and overwhelming.
Luckily, if you’re working with an agent, you don’t have to be an expert on these terms. But having a general understanding will ease the nerves and help you navigate the real estate journey.
Below are three terms that everyone will run into, whether buying or selling a property.
The option period is the defined number of days in which the buyer can have the property checked and inspected and may terminate the contract.
The option period may be “bought” for a price that both the buyer and the seller agree (the option fee). This fee can be credited back at closing. If the buyer terminates the agreement during the option period, the seller can keep the option fee.
The option period length of time can also be negotiated but is typically between one to ten days. If the buyer and seller agree that further negotiations are needed, it can be extended.
Escrow is a financial agreement in which the buyer and seller hire a third party to hold money, paperwork, and other assets on their behalf until both parties have completed their contractual requirements.
An escrow account to hold these assets will usually be opened by the buyer’s or seller’s agent and be deposited at the title company.
Escrow helps reassure the sellers that the buyer will complete the transaction.
A pre-approval from the mortgage lender suggests that the lender has evaluated the buyer’s assets and will authorize them for a home loan. It also implies that they are awaiting a final review of their finance.
With many loans, the property still needs to be inspected and appraised before the approval process can be completed.
Being pre-approved can help speed up the home buying process and show sellers that you can purchase their home. This can help set your offer apart from other buyers who might not know how they will finance the house purchase.
Knowing these terms will help you understand the inner workings of a real estate deal. If you have more questions on these term or other terms you have heard, please reach out to me. I am happy to help!