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8 Essential Real Estate Terms You Should Know in the Current Market

The real estate market is constantly changing, so it’s important to stay up-to-date on the latest terms and concepts. Here are 10 essential real estate terms you should know if you are considering buying or selling a home.

  1. Daily Mortgage Rates

Mortgage rates are not exactly static. There are a number of factors that can greatly impact the final cost. Mortgage rates are affected by a combination of inflation, the economy and the Federal Reserve’s monetary policy. Oftentimes you can shop around with different lenders to find the best possible rates for your home loan.

  1. Appraisal Gap

Simply, this is the difference between the appraised value of a home and the purchase price. It is caused by a combination of low inventory and high demand. Appraisal gaps can present difficulties for buyers to close deals. This is because lenders will only lend up to the appraised value of the home. If the purchase price is higher than the appraised value, the buyer will need to come up with the difference in cash.

Appraisal gap insurance coverage can be a good strategy to mitigate these issues. It can help make up the difference for prospective buyers. A buyer can also get a second appraisal if necessary. 

  1. Escalation Clause Example

An escalation clause is a provision in an offer to purchase that allows the buyer to increase their offer price if another buyer makes a higher offer. This clause serves to protect both the buyer and seller in their attempt to close a deal.

Escalation Clause Example: Let’s imagine you make an offer on a home for $1,000,000 dollars (Offer A) and your offer includes an escalation clause. In this scenario, another family comes in with $1,100,000 (Offer B). You would have the priority to match or increase the purchase price from Offer B. 

  1. Understanding Capital Gains Tax when Selling Property

A major question when selling a property is ‘What is Capital Gains Tax?’

Capital Gains Tax is a tax that is imposed on the profit made from the sale of an asset, such as a home. The profit is the difference between the sale price of the asset and your basis in the asset. Your basis is the amount you paid for the asset, plus any costs associated with the purchase, such as commissions and fees. The tax rate depends on how long you held the asset. If you held the asset for more than one year, the tax rate is 0%, 15%, or 20%, depending on your income tax bracket. If you held the asset for one year or less, the tax rate is the same as your ordinary income tax rate.

There are three other aspects to Capital Gains you should know. You can use capital losses to offset capital gains. This can help to reduce your overall tax bill. You can carry forward capital losses to future years. This means that you can use them to offset capital gains in future years. There are a number of deductions and credits that can reduce your capital gains tax liability.

  1. Selling a House “As Is”: What Does It Mean?

A term used to describe a property that is being sold in its current condition, with no repairs or renovations made by the seller.

Seller disclosure requirements are laws that require sellers of real estate to disclose certain information about the property to potential buyers. The specific requirements vary from state to state, but they typically include information about known defects in the property, such as structural problems, environmental hazards, and property boundary disputes.

  1. Contingent Offers in Home Buying

In real estate, a contingent offer is an offer to purchase a property that is subject to certain conditions being met. These conditions can vary, but they typically include things like financing, home inspection, and appraisal.

A contingent offer means that the buyer is not legally obligated to buy the property if the conditions are not met. This gives the buyer some protection in case there are any problems with the property or if they are unable to obtain financing.

For example, a buyer might make a contingent offer on a property that is subject to a home inspection. This means that the buyer is not obligated to buy the property if the home inspection reveals any major problems. Simply put, contingency offers allow buyers and sellers protection in a variety of situations. 

  1. Bank Foreclosure on a House: What Does It Mean?

A bank foreclosure is a legal process that allows a bank to take possession of a property if the homeowner defaults on their mortgage payments. The foreclosure process can vary depending on the state, but it typically includes the following steps.

Essentially, there are four steps to this process. The bank informs the borrower that they are behind on their payments and are at risk of defaulting on the loan. If the account is not brought current, the bank then files a foreclosure action lawsuit against the borrower. Then, the lender sells the property at auction. The proceeds from the sale go towards clearing the outstanding debt – any remaining balance would be the responsibility of the borrower.

For more information about foreclosures check out our ultimate guide. 

  1. Selling a House Furnished: Understanding the Concept

The sale of fully furnished homes is a growing trend in the real estate market. There are a number of reasons why sellers choose to sell their homes fully furnished, including:

  • To make the home more appealing to buyers. A fully furnished home can make a buyer feel like they can move right in and start living there, which can be a major selling point.
  • To save time and hassle. Selling a home can be a lot of work, and selling a fully furnished home can make the process a little bit easier. The seller does not have to worry about moving or storing the furniture, and the buyer does not have to worry about buying new furniture.
  • To get a higher price. In some cases, sellers can get a higher price for a fully furnished home. This is because buyers are willing to pay more for a home that is move-in ready.

However, there are also some potential drawbacks to selling a fully furnished home, including:

  • The furniture may not be to the buyer’s taste. The buyer may not like the style or condition of the furniture, which could make it difficult to sell the home.
  • The furniture may need to be replaced. If the furniture is old or damaged, the buyer may want to replace it, which could add to the cost of the home.
  • The furniture may be difficult to move. If the furniture is large or heavy, it can be difficult and expensive to move.

Ultimately, the decision of whether or not to sell a home fully furnished is a personal one. There are pros and cons to both options, and the best decision for the seller will depend on their individual circumstances.

Main Takeaways:

The real estate market is a complex and ever-changing landscape. By familiarizing yourself with the terms listed in this article, you can gain a better understanding of how the market works and make informed decisions about your own real estate needs. 

Learning these terms help to protect yourself and avoid making costly mistakes, such as overpaying for a home or agreeing to terms that are not in your best interest. By understanding the market, you can make better decisions about when to buy or sell a home, how much to offer, and what type of financing to seek. Lastly, they will help you communicate effectively with real estate professionals.

Real estate professionals use these terms all the time, so it’s important to be able to understand them in order to communicate effectively with them. Please reach out if you have any questions about the terms we discussed today!

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