When you are looking to rent or buy a home for your family or space for your small business, it is always helpful to know some of the common real estate terms used in the industry. This may be very useful in ensuring the buyer and the real estate agent fully understand each other when engaged in a deal. There is a whole dictionary out there of all the real estate terms but here are 10 most common terms you should be familiar with:
1. REAL ESTATE BROKER
These are State-licensed agents with the expertise in the leasing process. Good real estate brokers will usually help you find a great location for your home or office and will also assist you with all the aspects of the transactions involved.
2. COMMON AREA MAINTENANCE (CAM)
CAM is the additional rent charged to the tenant to maintain the common areas of the property shared by the tenants. It usually includes work done on the parking lots, stairways, snow removal, landscaping services, street lighting etc.
3. LETTER OF INTENT
This is an informal agreement between the tenant and the landlord indicating intent to move forward with negotiations. Such letter has legal implications and it is always advisable to consult a legal attorney before signing any Letter of intent.
An appraisal is the valuation of a property. A licensed appraiser evaluates the property on its price based on the previous sales of similar properties. Appraisals are used by the banks to determine the lending limit on a given property. A seller may also have a property appraised to determine the offering price during a sale.
5. CLOSING COSTS
Closing costs are the expenses incurred in the purchase and sale of real property. Closing costs are paid at the time of settlement or closing the deal. Examples of closing costs include title insurance, attorney fees, appraisal fees, recording fees and relevant taxes.
This is the amount of cash a purchaser puts down as an initial deposit to buy property. Most lenders require a minimum of 5% down payment for an owner occupied purchase where the purchaser intends to live on the property and at least 20% down for an investor purchased property where the investor does not intend to use the property as their primary residence. But these costs can vary depending on the area and or property.
This is regular payment of debt in periodic installments. The process usually involves making equal periodic payments at equal intervals of time. For example making $300.00 per month for 30 years
Equity is the difference between the market value of the property and the amount still owed on its mortgage. For example if the market value of your property is worth $90,000 and you have a current mortgage balance of $50,000, the equity would be $ 40,000.
Title insurance guarantees a return of your investment should a title problem arise after you take possession of the property. There are two types of title insurance: One, a fee title policy insures the owner’s title and two, a mortgagee title policy insures the lender for the mortgaged amount.
Collateral refers to the security put up in exchange for a loan. The collateral can be taken by the bank if the loan goes unpaid by the borrower. In the case of a mortgage loan, the collateral is usually the property.