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Terms to Get You Started in Your Investments

The real estate industry is full of niche-specific jargon that adds layers of confusion to the already complicated process.

Whether you are buying a property for the first time or starting a real estate investment, you will likely encounter words you have never heard before. This could be frustrating as you will have a hard time understanding the ins and outs of the market.

But fret not! This guide will help you familiarize those words and get you up to speed in no time. 

General Real Estate Terms

As is. A property that falls under “as is” means that the seller will not perform any refurbishment or repair works. “As is” might also pertain to the price, typically lower than pricing in the local market. The term could also mean the condition when the offer was written if something happens to the property that might alter the stated condition.

Buyer’s Agent/Listing Agent. These people are also known as the selling agent. They are licensed real estate professionals whose task is to find the buyer’s ideal property. These agents represent the best interest of their clients by negotiating on behalf of them to obtain the best price. Typically, buyer and listing agent commissions are 5% of the contract price per sale. Read the must-have qualities of a good realtor. 

Closing. Closing refers to the point at which the transaction is considered complete. A complete transaction involves all parties signing all required documents, transferring all funds, and receiving full lender approval if a lender is involved.

Accomplishing the Deed of Absolute Sale in the regional clerk’s office is the ultimate and final step of closing in most markets. Once everything is completed, the buyer is granted entry to the property and is declared the new owner.

Also, read Real Estate Documents You Need For Your Investment. 

Closing Costs. Closing costs are a collection of fees charged by a lender, title company, attorneys, insurance companies, taxation agencies, homeowner’s associations, real estate brokers, and other closing settlement entities. Closing costs are often paid when a real estate deal is completed.

Days on Market. Days on Market (DOM) is the number of days between the day the property is offered for sale and the date the seller signs a contract to sell to a buyer. 

DOM is also used as a metric for properties sold in a market during a given period. A low-average DOM implies a strong market. This favors sellers. Many buyers want to compete with a property; therefore, sellers can negotiate their best price.

Meanwhile, high average DOM indicates a weak market and favors the buyers. There are too many properties on the list in this condition, but only a few people are willing to buy them.

Due Diligence. This refers to the length of time indicated in the purchase agreement that allows the buyer to evaluate a property thoroughly. Buyers usually do this by paying professionals to inspect the property, do tests, and so on to make an informed decision.

To avoid being considered in default of the contract, a buyer may be given the option to renegotiate the contract based on their evaluation.

In some instances, the buyer could even terminate the deal within a defined time limit. Due diligence protects and enables a customer to understand what they are purchasing completely.

Escrow. This term is a legal concept in which a third party holds a financial instrument or an asset on behalf of two other parties involving a transaction. In other words, when you employ an escrow service, there will be a 

third party that acts as a guarantor. An escrow agent holds the funds or assets to make sure that financial commitments are fulfilled. As a result, no one can utilize money without the consent of the other participants. 

Multiple Listing Service. A multiple listing service (MLS) is a database that allows real estate agents and brokers to search for and update information on properties for sale in their region. When a home is listed for sale, a listing agent enters it into the local multiple listing service (MLS). 

Meanwhile, the buyer’s agents frequently consult the Multiple Listing Service (MLS) to see what’s available and what similar homes have sold for.

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