Real Estate Terms You Need To Know

Christian: [0:05] Hello, hello, and welcome to another episode of The Awesome in Seattle Podcast. This is your host, Christian Awesome, of the Awesome and Awesome Group at Wilson Realty Exchange, Inc. And today we are going to talk about all of the things that you need to know, all of the, the vocabulary that you need to know during the home buying and selling process. Now, during our beers and home buying class, we hand out a vocabulary sheet that has about 15 to 20 words on it, that are the most common terms that you're gonna hear over and over and over again during your home buying or selling process. And a lot of times they are very confusing for people, and they don't totally know what it is. So we thought it would be wise to create a podcast where we just quickly explain them so that you don't have to read a sheet. You can hear a little bit more, like a little more of the nuance of, of what some of these terms mean. So that's what we're doing today. Joining me today are the awesome agents of the Awesome and Awesome Group, Miss Joanna Beecher.

Speaker 2: [1:06] Hello.

Christian: [1:07] And Miss Melanie Ghadamy.

Speaker 2: [1:09] Hello.

Speaker 3: [1:10] In addition to the awesome agents of the Awesome and

Christian: [1:13] Awesome Group, I also have my three children joining me on this episode of The Awesome in Seattle Podcast. We have Aveley, Boden, and Alaya.

Aveley: [1:23] Hi, this is Aveley Nossum, and I'm 12 years old.

Speaker 3: [1:26] Hi, I'm Boden, and I'm nine years old. My name is Alaya, and I'm six.

Christian: [1:32] All right, so let's start. We're just gonna go straight down, alphabetical order, rapid fire. First up is APR. Everyone's heard APR, not everyone understands totally what it means. It stands for annual percentage rate. It reflects not only the interest rate, but also any discount points, meaning fees that you pay to buy down your interest rate, any broker fees, and any other charges that you may pay to get the loan.

Speaker 2: [1:57] Okay. The next one is closing. Now, this refers to the day that the keys are transferred to the new buyer and the funds are transferred from the buyer to the seller.

Speaker 3: [2:10] Okay, let's see what one of the kids thinks about this one. Closing is when you finally have bought the house and got the keys.

Speaker 5: [2:17] All right. Closing costs, which are certain costs associated with purchasing a home. Usually adds up to about 2 to 3% of the purchase price. It includes, but not limited to, lender fees, title, and escrow fees, prepaid homeowners insurance, property taxes, et cetera.

Christian: [2:37] Yep, and this is on top of your down payment. So if you have a 5% down payment, assume you're gonna need another 2, possibly 3%. And you'll know this. The lender will tell you this ahead of time, how much this is gonna be. Next up we have contingencies. Now, a contingency is part of an offer that allows you to back out of the contract without penalty, normally without loss of your earnest money. Now, the most famous and common contingencies are your inspection contingency, your financing contingency, which means your loan, getting the loan, and the appraisal contingency.

Speaker 2: [3:14] Let's see what the kids think.

Speaker 3: [3:16] Conting- Is when you get in and out of the offer?

Speaker 2: [3:23] Contingent status is when the sellers have accepted an offer on the home, contingent on the buyer selling their own home.

Christian: [3:32] Yeah, so a prime example of this is, let's say that I am selling my house. I have an offer that I am accepting, but the buyers that are buying the house from me, they have to sell their house first. That's really all that's saying.

Speaker 5: [3:46] All right, discount points, which Christian mentioned earlier, is an additional sum of money paid to the lender at closing in order to buy down your interest rate.

Christian: [3:56] Earnest money. Earnest money is a, is a good faith deposit made to the seller after you get your offer accepted. Usually, this is 1 to 3%. If it's a competitive situation, it could be possibly 5%-ish of the purchase price. This is not in addition to your down payment. This will be applied towards your down payment. You are just depositing this early. So, you're usually depositing this within two to three days of getting your offer accepted. Again, it will go towards your down payment. It's not in addition to your down payment. If you were to back out of the offer, and you don't have a contingency allowing you to back out, this is where your earnest money could be lost to the seller.

Speaker 2: [4:40] Escrow, a third party which executes the contract and disburses the funds from the buyer to the seller upon closing, or if you release funds early in certain offers.

Christian: [4:54] Yep, and they are a neutral third party. They don't care about either side. They're just literally looking at the contract going, "Cool, you're a buyer. You're the seller. I'm gonna do whatever the contract states."

Speaker 2: [5:05] Yes.

Speaker 3: [5:06] All right. Well, let's see what the kids think about this.

Aveley: [5:09] Escrow is a third-party company that holds the money until the closing date, and then tells the city, "Yep, they bought this," and then gives the money to the seller.

Speaker 3: [5:19] What is escrow? Someone who roasts chicken for the party? I have no idea.

Speaker 5: [5:28] Interest rate, the amount a lender charges you to borrow money, expressed as a percentage.

Christian: [5:35] Okay, let's see what one of the kids thinks about this one.

Speaker 3: [5:38] Interest is when you pay extra money once you borrow money.

Christian: [5:44] Listing agent, this is the real estate broker that represents the seller. They are listing the property for sale. They are the listing agent. So again, they represent the seller.

Speaker 2: [5:55] Okay, let's see what one of the kids thinks about this one.

Aveley: [5:58] A listing agent is somebody who helps the sellers put the listings on the market for people to buy, so they get a house. I want a house. Houses are cool, guys. Real estate is awesome.

Speaker 2: [6:12] Pending status The sellers have accepted an offer on the home. So when you are looking at your whatever home site you scroll through, if something is for sale and you wanna go see it, but before you go see it, you see it go to pending status, that's what that means.

Christian: [6:31] Yep. No longer available- No for sale because the seller already accepted an offer.

Speaker 5: [6:35] Correct. PMI, which stands for private mortgage insurance. It's insurance paid to the lender if you put less than a 20% down payment.

Christian: [6:45] Yeah, and one thing that we hear all the time from the lenders that join us at our beers and home buying class is PMI, there's a big stigma attached that it's really, really expensive. It's really not. I mean, we've seen quoted for a lot of clients, it's anywhere between $80 a month to an extra maybe $200 a month. It depends on a lot of different factors, but your, your lender will be able to help you determine how much that would be for you. Possession. This is the actual day that you get possession of the home and you can start moving in. Most of the time, possession, the day of possession is the day of closing. But sometimes you may choose to l- let the seller stay there for a few more days after closing, and then you have a different possession date.

Speaker 2: [7:34] Pre-underwriting is when the mortgage company or lender that you've chosen vets you for your financial and agrees to give you the loan before you start your home search.

Christian: [7:47] All right. Well, let's see what the kids think about this.

Aveley: [7:50] Pre-underwritten is when you go to the bank, and they say, like, "Yeah, you can buy this house," and they give you the money, a certain amount of money, so that you can buy the house because they know their, like, your financial- Like budgets and stuff

Speaker 5: [8:07] Selling agent, also known as buyer's agent. When you purchase a home, this is the person who will assist you through the process.

Speaker 2: [8:14] Signing appointment. When the escrow company gets in touch with you to sign all of the loan and purchase documents. This normally happens one to two days before closing and takes about an hour, and escrow will be the one who coordinates all of this with you.

Christian: [8:30] All right. Sold search. Now, this is something that we do, and I don't know if anyone else really does this, because we created this, but this is a special thing. So this is when we create a list of properties that meet all of your search criteria. So in your price range, in your, like, neighborhoods that you wanna live in, meets all of your home search criteria, and we show you everything that has sold within the last 60 to 90 days or so. What you do then is you look through all of these sold homes, and you choose and you send us a list of all the homes. Let's say there's 75 houses that pop up. Out of those 75, you say, "I would have bought 18 of them." This is all example, obviously. Out of those 18 homes, we then run the numbers, and we teach you, we educate you, that based on your specific market, the homes that you like and would have bought are selling at 104% of the asking price, meaning 4% over the asking price, in, on average, seven days. And this right there helps to really calibrate you to your specific market. So now, after you learn this, and after you do this sold search, you will then go, "Okay. Well, if something pops on the market that I like, most likely it's gonna sell for about 4% over the asking price in about a week. So I need to jump on it and know that it's gonna cost a little more than what they're asking." That's the whole point of a sold search. We do these for all of our clients when they're starting their home search, and it's our very first step after you get your budget figured out, so I guess second step, um, and it really helps you to understand what is realistic. And sometimes after you do this sold search, you go, "You know what? I'm not ready to buy, 'cause I don't like any of the things I can afford right now. I'm gonna save up a little bit more," or, "I know that I'm getting a bonus in two months, so let's do this again in two months when I'm gonna have more cash and can afford a little bit more." And the last thing is strategy session. This is also free. So this is a private one-on-one meeting with us. We generally have a lender on this call as well. And we just answer all of those questions that you have, that you're, maybe if you're at our beers and home buying class, you don't necessarily wanna raise your hand and say these things or ask these things in front of your closest 20, 30, 40 friends that you just met that day. This is where you get to ask in private those confidential questions, maybe pertaining to your credit or your financial situation. We can give you a clearer idea of what timeline makes sense for you based on your situation. These are 100% no pressure. There is zero cost to do these. There's no obligation or anything to do anything after this meeting. We're just giving you the answers that you need to learn in order to understand, should I buy a house? If I do buy, what can I buy, and where can I buy it? And after you get all that information, that's when you get to decide, yep, I do wanna do this, or no, I don't.

Speaker 2: [11:34] Let's see what the kids think.

Aveley: [11:35] A strategy session is when you meet either in person or online and talk about which, like, houses you want or what you're looking for or your budget and what you're trying to buy.

Speaker 3: [11:47] Strategy session is when you take a group of people and talk to them about buying houses.

Aveley: [11:56] What is a DADU?

Christian: [11:58] All right. Well, let's see what the kids think about this.

Speaker 3: [12:00] A DADU is a house in somebody's backyard. A DADU is a hou- a detached unit behind the house in a backyard.

Aveley: [12:11] A DADU is a backyard cottage or otherwise known as a detached part of the house in your backyard.

Christian: [12:19] That's it. That's it for the most common vocabulary words that you're gonna come across during your home buying and potentially home selling process. If you ever have questions and you want to sign up for one of those free strategy sessions with us, you can do that right on our website, AwesomeNossumGroup.com/schedule. Right there, totally free. Again, no obligation. Thank you so much for listening to this episode of the Awesome in Seattle podcast. We'll see you next week.

Aveley: [12:48] Bye. Bye.