In this second of a three-part series of real estate terms that you need to know, we will continue to explore terms that you might encounter when buying or selling a home.
As you look to purchase a home, you may be interested in buying one that has gone into foreclosure. Foreclosure is a general term used to describe when a property is repossessed by a bank due to the owner failing to make mortgage payments. There are different stages of foreclosure, however, and so the process used to purchase a property that is in foreclosure may vary. Therefore, if you are interested in purchasing a property that is in foreclosure, it is a good idea to consult with a real estate agent with experience with this type of purchase.
When a homeowner owes more on a home than its current value, that home is said to be “underwater” or “upside down”. If you are interested in purchasing the home for its value rather than what is still owed on it, it is referred to as a short sale. In order to purchase a short sale, the original lender has to approve the lower listing price. In this case, the property is said to have been approved for short sale.
Pre-Approval Vs. Pre-Qualification
Once you decide to start looking for a home, you may wish to be pre-approved or pre-qualified to purchase the property. Pre-qualification is a basic assessment of your income, assets and credit score that is done in order to determine what types of loans you may qualify to receive. Pre-approval is more in-depth, as this involves conducting a thorough assessment of your income and assets in order to determine how much you will qualify to receive in a loan. Being pre-qualified can give you a leg-up on others who may also be interested in purchasing a property, as the seller can be certain you will be approved for a loan.
Sellers Vs. Buyers Market
In the Boston area, you may have heard that it is a “sellers market”. Being a sellers market means that the market conditions exist in such a way that the number of homes for sale is less than the number of buyers. This means the seller can command a hire price for the home due to the greater competition. The opposite of this is a buyers market, in which the number of available homes for sale is greater than the number of buyers. In this situation, the buyer has more room for negotiating a better price.
Contingencies are conditions written into the purchase contract that are meant to protect the buyer if issues arise with financing or if problems are found during the inspection. These contingencies allow you to back out of the purchase agreement if certain requirements are not met.