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One of the complications of buying or selling your home is the whole new set of vocabulary you have to learn. Every person in a real estate transaction serves their best interests. It is your responsibility to understand what is going on, so you will need to familiarize yourself with common real estate terms.
Some of the more common terms you should know include the following:
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Realtor®/real estate agent. The only people permitted to call themselves Realtors® are those who are certified and licensed by the National Association of Realtors® and who are obligated to uphold certain ethical standards.
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APR. This stands for Annual Percentage Rate. It refers to everything covered by your mortgage loan, expressed as a percentage of the loan amount. So, if your fees and other charges were 7.5 percent of your total mortgage, your APR is 7.5 percent. It is often higher than the interest rate on the amount of the mortgage by itself.
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Assumable Loan. This kind of loan can simply be transferred from one owner to another. This way the new buyer isn't starting from scratch in paying off the house and is often an attractive incentive for the buyer. Nowadays, this can only be done with the consent of the bank.
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Closing costs. These are usually one-time, out-of-pocket costs that the buyer pays when finalizing the purchase of the home. Closing costs do not include the down payment, but do include mortgage insurance, homeowners' insurance, and sometimes property taxes. The amount usually totals three to four percent of the loan's total value.
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Earnest money. This is a deposit the buyer puts down when he or she makes an offer on the house. It shows good faith that the buyer intends to follow through on the purchase. It is often necessary for the seller to feel confident about taking the house off the market. This money is placed in a holding account, called an "escrow account," so that it is not in the buyer's or the seller's possession until after the sale is final. It then becomes part of the down payment.
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Inspection. A licensed inspector will come and evaluate the property's condition and present a written record. The inspector will search for termites and evaluate the foundation, roof, kitchen, baths, and major appliances such as the furnace, air conditioning, and water heater.
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Property taxes. Taxes that are assessed by the county and paid by the homeowner to cover the costs of community services such as schools, public works, and the local government. Be aware that the communities with the highest property taxes are also very often the ones with the best schools.
These are just some of the most common real estate terms you will hear. There are many other real estate terms that are used, so if there is anything you do not understand, ask your Realtor® or attorney to explain it. You may save yourself some expense in the end.
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