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5 Key Real Estate Terms For First Time Home Buyers
If you're in the market as a first-time home buyer, I understand how you must feel. I deal with this stuff every day, and I still vividly remember how much information I had to take in.
While the Residential Purchase Agreement (RPA) is 10-pages long, you don't need to have an attorney's level of understanding in order to have a successful home buying experience. However, there are a few key terms you'll need to at least be familiar with:
Escrow - The word "escrow" can be used interchangeably depending on the context. Escrow can mean either the process through which real estate is exchanged, or it can mean the trust account that escrow companies use to distribute funds at the close of the transaction.
Deposit - The deposit is the "good faith" or earnest money that is put into the escrow trust account once escrow has been opened. Traditionally, the deposit is 3% of the purchase price.
Down Payment - Not to be confused with the deposit, the down payment is the amount of money put towards the purchase price. The purchase price minus the down payment will equal the required loan amount.
Title/Vesting - The property title explains how ownership will be held, and/or who will hold title, or legal ownership of the property. Under California law, there are various ways that individuals can hold title to a single property, which affords those individuals certain rights and privileges depending on how they choose to hold it. If you are buying the property with your spouse or partner, you will most likely choose to hold title as "joint tenants", meaning both individuals hold an equal interest in the property, and that interest can be passed on to survivors without going through a probate sale.
Contingencies - A contingency is an "if, then" clause that must be satisfied in order for you to move forward with the purchase. For example, the loan contingency means your offer is contingent upon your approval for a home loan. The inspection contingency means that your offer is contingent upon a satisfactory, professional home inspection.
Before you start writing offers, it's important that you understand all the terms and conditions of the purchase agreement. The last thing you'll want to do is sign a 10-page agreement that you know nothing about just as you're about to make the biggest investment of your life.
A little investment of time goes a long way in terms of providing you with peace of mind. Not only that, but there is a good amount of strategizing that can be done using the different "toggles" in the purchase agreement to write a strong offer, which can ultimately save you a lot of money by avoiding a bidding war.
If you have any questions at all, please don't be a stranger about reaching out.
Andrew Ramirez was born and raised in Orange County, living in Irvine and Tustin as a child before moving to Costa Mesa in 2001. He lived there for twelve years before marrying his high school sweethe....