Debunking Complicated Real Estate Terms
Purchasing a home can be a tricky process, especially for first-time homebuyers. You work with agents, brokers, mortgage lenders, home inspectors, and a plethora of other real estate-savvy professionals that are well versed in the legal jargon involved with the buying and selling of homes. To ease some of the angst and confusion around real estate transactions, we’ve defined some of the most common terms that will appear during contract signings, closings, deed preparations, surveys, and more.
This is the document you sign to complete the sale or purchase of home, right? While the simple answer is yes, contracts are far more detailed than that. Contracts can include listing agreements, agency agreements, and closing documents; essentially any legally binding document signed throughout a real estate transaction is considered a “contract.”
Contracts cover several specifics about the transaction including purchase price, closing costs, earnest money deposits, loan agreements, conveyed fixtures, as well as the names of involved parties. A lot is on the line should one party default or misunderstand the terms of the agreement, so we advise sellers and buyers alike to have a qualified real estate attorney review documents before signing.
While this is a rather colloquial term, what exactly does a deed include? By definition, a deed is a physical document that transfers ownership from one party to another. It must be signed by the grantor, otherwise known as the seller, and include a physical description of the real property, as well as names of both the transferring and receiving parties.
Fun fact: Deeds require very specific design elements including margins, paper size, ink color, and in some instances, paper weight.
Estates are often used to describe grandiose properties with sprawling lawns and lavish amenities. In real estate, however, the term “estate” refers to more than just the property itself. An estate encompasses all property and money owned by a person. Such possessions are often distributed to designated beneficiaries upon one’s death. Specific instructions regarding the assets and distribution of the estate are often outlined in one’s will or trust.
Most buyers and sellers know that getting to closing is the main goal, but what happens during this final meeting? At closing, a home sale is considered final and buyers assume the position of new homeowners, so long as all monies are conveyed, all required documents are signed, and the deed is recorded (in some states).
Essentially, a successful closing results in a shiny set of keys to your new home! Warranties on the house, appliances, or heating and cooling systems may also be conveyed at closing. Warranties will certainly come in handy should you face any issues after move in. If necessary, an attorney can intervene to help resolve any consumer relations matter with the manufacturer, or in some cases, the repairman or woman performing work at your home.
Purchasing a property with an easement means that the real estate of interest, or a neighboring property, has the right to access the other for a specific purpose. Examples include shared access to a main road, access to power lines, etc. While one homeowner has access to utilize the property of another, rights of property (possession, enjoyment, and the like) are exclusive to each homeowner.
Should these rights of property be violated, especially in tenant-landlord matters, you should seek legal advice on how to handle the dispute civilly.
Not be confused with a deed, title is the concept of lawful ownership which declares the right to use and modify the property as you deem necessary. Title insurance is often required as a part of closing to protect buyers from assuming a property whose title is not “clear,” meaning its title is “clouded” or riddled with encumbrances such as judgements or liens.
A lien is a legal right or claim against a property. The lienholder, or creditor, holds the rights of the lien and secures interest by issuing a mortgage to the homeowner. As the homeowner pays their monthly mortgage, they slowly chip away at the time in which the lien will be held against their property. A lien also acts as collateral during situations in which a homeowner defaults or can no longer honor their debt obligations, sometimes resulting in foreclosure.
Even after some explanation, these real estate terms may still be confusing. We suggest utilizing your Legal Plan to partner with a Real Estate Attorney during your home search. They, along with a real estate agent, can walk you through the process of buying or selling, deed preparation, and important document review to ensure no legal terms are lost on you.