Michigan Real Estate Terms You Should Know: A Full Handbook

The real estate process can be a hard one to navigate, even if you’re an experienced veteran of homebuying. Beginners have their work cut out for them if they want to understand all of the regulations, local laws, and best practices that come with buying or selling a house. No matter which side of the process you find yourself on, the best thing you can do is to educate yourself about the terms every transaction is sure to include. Some of these terms might be familiar to you, but make sure you truly understand what they mean before you get yourself into trouble. 

14 Real Estate Terms You Should Know In Michigan

agent for real estate terms

Agent

If you’re buying or selling a house on the open market, you will probably be dealing with real estate agents. Are you aware there are different types? The buyer’s agent represents the person or persons trying to buy a property. The listing agent represents the person or persons selling the property. It is possible that one or both sides will not work with an agent, but it’s not usually recommended unless they are real estate experts. There are many aspects to a real estate transaction on the open market that require someone with the knowledge needed to navigate them. It’s also important to note that an agent should never represent both parties in a transaction as that presents a conflict of interest. Realtor is another term for real estate agent, although only someone who is a member of the National Association of Realtors can technically call themselves that. 

Appraisal

An appraisal is how you determine real estate value. Appraisals happen in almost every real estate transaction and help determine whether or not the final sale price is appropriate given the condition of the property and state of the current market. If the appraisal varies from the sale price, it can force the deal to be renegotiated or even canceled. While the buyer will almost always require an appraisal, a seller can pay for one as well in order to provide unbiased data. Both sides can also make appraisal concessions based on how much they want the transaction to occur. 

As-Is

A property in “as-is” condition is one where the owner or seller does not intend to make any repairs or renovations based upon the current condition. If there is extensive damage or some kind of financial distress related to the property, the buyer would understand they are taking that on without the help of the current owner. Typically, an as-is house is sold for less money on the open market due to a distressing condition. Real estate investors, like 810 Home Buyers, often offer to purchase a house as is in order to help a buyer who is unwilling or uninterested in making repairs but doesn’t feel as though they’ll be able to get a good deal on the open market. 

Concessions

If a seller thinks their property isn’t attractive enough to sell, they might offer concessions to make it more appealing to potential buyers. Concessions can vary but often include closing cost help, price deductions for necessary repairs, and paid insurance to cover any potential headaches. A buyer may also make a request for concessions as part of the negotiation if they feel as though they have negotiating power. Ultimately it comes down to the market and how much both sides want to close on the property.

Contract

A contract is a document that outlines the terms of the sale for the property. Once the buyer and seller agree on the terms of sale, a property is considered “under contract.” Contracts are usually dependant on an unbiased appraisal, inspection, and financing approval, amongst other things. Contracts can be amended following inspections in order to appease a party that feels as though the conditions of the sale have changed.

Closing Costs

Closing costs are any fees paid at the end of a real estate transaction. Both sides often need to pay closing costs, but the specifics depend on the state, city, and county.  Common closing costs include an application fee, escrow fees, and mortgage insurance premiums. Closing costs can also be part of the negotiation, especially if you’re in a buyer’s market. Only after closing costs are fully paid can the property title be transferred.

Contingencies

Contingencies are conditions in the contract that must be met in order for the sale to be completed. These might include a home appraisal, financial requirements, and specific timeframes. If contingencies are not met, the buyer can often opt-out of the sale without losing their earnest money deposit. The seller can also opt-out if the buyer fails to live up to their requirements. 

Earnest Money

When both sides are under contract, the buyer will put down a deposit known as earnest money. This usually ends up being one-to-three percent of the sale price. Earnest money protects the seller in case the buyer decides to walk away from the sale while the contract is still valid. If the buyer backs out without cause, the seller can keep that earnest money. If the seller doesn’t meet the contingencies laid out, the buyer usually gets their earnest money back. 

Escrow

Escrow is a third party that acts as an unbiased control in order to ensure both parties remain accountable. This often includes holding onto financial deposits and contract documents until both sides agree to the closing. Escrow ensures that everything happens in order to fulfill the contract as it should. Once the contracts are signed, escrow will disperse the funds and transfer the property title.

inspection checklist for real estate terms you should know

Inspection

For an inspection, a licensed inspector will visit the property and document the condition. This person will document any necessary repairs needed to meet the requirements of the contract. A buyer will do their own inspection as well to ensure the property meets their demands. A lender will almost always require an inspection. The buyer can ask the seller to cover the costs of repairs needed or for other contingencies based on what the inspection uncovers.

Mortgage

A mortgage is a loan that is secured against a specific piece of real estate, such as a house. The borrower, who is the buyer of the property, agrees to repay the mortgage plus interest via a predetermined set of payments, often monthly. Mortgages can also be known as “liens against property” because if the borrower stops paying back the mortgage, the lender can foreclose on the property and take ownership over it. This is known as foreclosure and often includes the lender removing the borrower from the home in order to sell it and recoup their money. 

Offer

When a buyer decides they want to purchase a property, they make an offer. This can be the price the seller asks for but it can also be very different. If the buyer thinks they can buy a house for less, they may make a lower offer. If there is a lot of competition, they may make a higher offer in order to beat others.

Real Estate Investor

For many reasons, some sellers don’t want to or can’t list their homes on the market. Whether it’s because the house is distressed or in disrepair, there are financial issues tied up in the house, or the seller simply needs to sell the house ASAP, a real estate investor, or direct home buyer, can buy the house from them as is. They make a fair cash offer based on the condition of the house and give the seller the ability to choose how quickly they’d like to close.

Title & Title Insurance

A title is a document that provides legal ownership of a property. The name on the title is the rightful owner of the house or property. Title insurance is what protects the owner of the property, as well as their lender, from loss or damage that could come from the discovery of liens or defects in the title. So while most insurance protects against the unknown, title insurance protects against what has happened already but the current owner was not aware of.

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