Everything you need to know before signing a contract
Updated: Aug 15, 2019
Definitions for Key Words in Real Estate
Like most professions, the real estate business has a language. If you are planning to buy a home, review these key real estate terms and definitions. You'll want to know basic real estate language before signing a real estate contract.
You should understand everything in a contract before you agree, in writing, to its terms
Contract-legally binding document between a home seller and home buyer. Terms and agreements signed off by all parties
Ratified Contract-legally binding document signed by all parties involving specific agreed upon terms in the sale and purchase of a specific home.
Appraisal-an independent review, ordered by the lender, to estimate the value of a home. The results should be at or above the sales price-if not, then the appraisal contingency comes into play
Appraisal Contingency- written into the contract and agreed upon by home seller and buyer. This contingency, or condition, means the contract is not binding unless the Seller and Buyer agree on how to make up the difference between the sales price & the appraised value of the home
Home Inspection-paid for by the home buyer-this is a thorough inspection of the home, done by a professional who evaluates the major systems and structure of a home.
Home Inspection Contingency-included in the purchase contract, this contingency means the home must pass the home inspection in order for the deal to be completed
Financing Contingency-protects the buyer in case their lender denies financing, through no fault of the buyers
Good Faith Estimate-an estimate of your settlement charges and loan terms.
Lender Letter- the document provided after the initial meeting and credit report by a lender. This is not a loan commitment.
Default- pertaining to a contract, being in default means not having the money at settlement day. This is serious and you never want to be here!
Here are a few things to know to avoid default. "Time is of the essence" is a phrase in a contract. It means you have to perform all required steps within the timeframe established in the contract. This includes applying for your loan within 7 days of ratification.
Another way to be in default is making major purchases, or opening credit card accounts, after applying for your loan (this could cause you to be in default)
This is not a complete list of contract terms and definitions, but it's a start.
Marshall Henderson is an Exclusive Buyers Agent with Buyer's Edge, licensed Realtor in Virginia, Maryland and Washington DC
Victoria Henderson is an Associate Broker and Exclusive Buyers Agent with Buyer's Edge, licensed Realtor in Maryland, Virginia and Washington DC
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