Here are some terms that will help you navigate through the process of buying or selling your home in Guerneville.
Appraisal: An appraiser will estimate the value of the property based on the condition, market conditions, amenities, location, and other influential markers.
Annual Percentage Rate: The Annual Percentage Rate is often called the APR. Per the Federal Truth in Lending Law, lenders must provide to potential borrowers an APR or annual cost of the mortgage. It should accurately reflect the cost of getting and holding a mortgage for a year. This is a great tool for borrows so that they can select a mortgage that provides the lowest annual cost that they qualify for.
Clear Title: A Clear Title is a title for which a search has been done and no other owners have been found for the property and no unexplained liens or legal issues are present.
Closing Costs: Closing Costs are paid during the finalization of the purchase of real estate. Typically the closing costs will include fees like the origination fee, recording fees, document fees, points, attorney fees(if applicable), survey fees, fee for title insurance for the property and the payment or real estate taxes. These are subject to the individual transactions and should be discussed with your escrow officer.
Cloud On A Title: An irregularity, possible claim, lien or encumbrance that if valid would affect or impair the title. For instance if John Doe gets a new roof but doesn't pay the roofers and they file for a mechanics lien then the lien would become a cloud on the title.
Deed: A legal document that indicates ownership of a piece of real estate. It transfers title of a property that is passed from one owner to another.
Disclosures: These are a series of documents provided during escrow that outline any and all information known by the Seller, Listing Agent and Selling Agent to the buyer so that they know as much as possible about the home they are purchasing.
Duel Agency: In the case of a Duel Agency a single agent is representing both the buyer and the seller as both the listing agent and the selling agent.
Earnest Money Deposit: Money is deposited by a buyer after an offer has been accepted and a residential purchase agreement has been signed within three business days (or number of days designated on the RPA) to escrow. This money is to be held in escrow for the duration of escrow being open.
Equity: The equity of a property refers to the difference between the current market value of a property and the total amount borrowed on that property.
Escrow: A neutral third party company (in our area it is typically a title company) will open an escrow and act as an agent for both the buyer and seller, or lender and borrower. They will carry out instructions of both and disburse documents and funds. Escrow closes when the property transfers or a document is completed fulfilling certain conditions.
Fannie Mae: Fannie Mae is a nickname that is used to describe the Federal National Mortgage Association which is a large supplier of mortgages for the entire nation.
FHA: FHA is an acronym used to describe the Fair Housing Administration which is an agency of the United States Department of Housing and Urban Development otherwise known as HUD. It guarantees certain loans obtained by qualified buyers.
Foreclosure: A Foreclosure will occur will occur when a borrow can no longer meet their monthly mortgage payments. The lender typically sells the property so that he can get a return on his investment.
Inspection Contingency: An Inspection Contingency is exactly how it sounds. The sale is contingent on nothing coming up on the inspection that would cause the buyer to back out. This time frame is provided for buyers to do any and all inspections that they deem necessary. Once all Contingencies have been released the buyer is still able to withdraw from a transaction however their Earnest Money Deposit is forfeited to the seller. If a buyer withdraws before contingencies have been released their Earnest Money Deposit will be returned to them.
Inspections: Inspections are done by professionals specializing in a specific area. A report will be issued by the inspector that outlines what they found when they inspected the property. The most common inspections done in the Russian River area are Home inspection, Pest Inspection, Septic Inspection, and Well Inspection. However, Millar and Company recommends that you do any and all inspections that you deem necessary so that you feel comfortable in your investment.
Lender: A lender is the individual, bank, or company that is offering the mortgage loan to the borrower.
Lien: A claim that one party has against another as security for a debt. The claim is held against the property and must be repaid when the home is sold or destroyed.
Listing Agent: The real estate agent who has a listing agreement for a property and is representing the Seller.
Loan Contingency: The Residential Purchase Agreement will grant the buyer a time frame in which to obtain a loan unless the offer is an all cash offer. The transaction will be contingent on the buyer getting the loan. If the buyer is able to get the loan then they can release loan contingencies and the transaction can close. However if the buyer is not able to get the loan they can withdraw from the transaction within the time frame and get their Earnest Money Deposit back.
Mortgage: This is a binding financial agreement between the mortgagee and the mortgagor as a loan from one party to another typically for a piece of real estate.
Points: Points are percents of a loan. Typically a lender will charge a certain amount of points on a loan. For instance they may charge one point on a $300,000 loan. They would be charging 1% of $300,000 or $3,000 dollars to provide that loan. A borrower can negotiate points and pay the lender more points in order to gain a lower interest rate on the loan. Essentially the borrower would be paying more up front but have a lower interest rate over the years and potentially pay less in the long run.
Pre-Approval: An evaluation of a potential borrower by a lender that determines whether the borrower qualifies for a loan from the lender, and the maximum amount that the lender would be willing to lend.
Preliminary Title Report: A property report and title search preformed by the title company before issuing title insurance, which shows the recorded condition of the property in question.
Property Taxes: Taxes that are imposed by local and state governments based on the value of the home. Homeowners pay these taxes annually.
Residential Purchase Agreement: The Residential Purchase Agreement is commonly referred to by agents as the RPA. It is a transaction agreement between a buyer and seller. This document is also signed by the buying and selling agent and a section filled out by the company holding escrow.
Selling Agent: This is the agent representing the buyer in a transaction.
Title: A title is a legal document that indicates an individual’s ownership of a specific piece of real estate.